Licences and Royalties
The following laws are applicable to technology transfer agreements:
- Decision 291 of the Commission of the Cartagena Accord (published in Official Gazette 682 on May 13 1991);
- Decision 344 of the Commission of the Cartagena Accord (published in the Official Gazette on October 29 1993 and in force since January 1 1994);
- the Intellectual Property Law (published in Official Register 320 on May 19 1998);
- the Investment Promotion and Guarantee Law (published in Official Register 219 on December 19 1997);
- the Investment Promotion and Guarantee Law Regulations (published in Official Register 346 on June 24 1998); and
- the Consumers Defence Law (published in Official Register 116 on July 10 2000).
Decision 291 requires licensing agreements to be recorded with Ecuador's Industrial Property Office. The Industrial Property Office is required to evaluate the benefits the imported technology will provide to the national economy (eg, likely profits). Furthermore, agreements on the transfer of technology must be recorded with the Ministry of Foreign Trade, Industrialization and Fisheries in order to be regarded as an investment. Certain technology transfer agreements require the ministry's prior approval, including: (i) those that establish fixed payments or payments that exceed 5% of annual net sales of the items covered by the agreement; and (ii) those that are to be executed by foreign enterprises under Decision 291 of the Andean Community.
Interested parties have 30 days after signing an agreement to record it. However, the law does not provide penalties for failing to record agreements within this period.
The Investment Promotion and Guarantee Law Regulations prohibit agreements to import certain types of technology. Furthermore, Article 117 of Decision 344 provides that licensing agreements may not contain clauses that restrict commerce or create unfair competition. The Investment Promotion and Guarantee Law Regulations also provide that agreements containing any of the following clauses, among others, may not be recorded:
- tie-in clauses (ie, whereby the supply of technology or use of a mark creates an obligation to acquire capital goods, finishing supplies, raw materials or other technologies from a specific source);
- clauses providing that the corporation licensing the technology (or trademark) reserves the right to set prices for the products manufactured by using the technology;
- clauses containing restrictions on production volume;
- clauses prohibiting the use of competing technologies;
- clauses providing that the licensee must transfer to the licensor any inventions or improvements that are made by using the technology; or
- clauses requiring the payment of royalties to owners of unused or expired patents or trademarks.
The Investment Promotion and Guarantee Law Regulations provide requirements for licensing agreements. Licensing agreements must contain the following information:
- the names of the parties, their nationalities and their addresses;
- the manner in which the technology shall be transferred;
- the contract price; and
- the duration of the agreement.
Royalties must be paid for both tangible and intangible technological contributions (but not capital contributions).
The Intellectual Property Law provides that owners of industrial property rights and plant varieties may grant licences to third parties (by written agreement) covering production or use. However, collective marks may not be licensed to third parties. Sub-licences require the express authorization of the owner of the rights.
Licences that affect industrial property rights and plant varieties should be recorded in the relevant register. The effect of registration is that the licence will be retroactively valid from the date the application for registration was filed (ie, against third parties who use the technology without a licence). Agreements that are not recorded are still valid, but it may be more difficult for licensees to enforce their rights against third-party infringers.
The Consumer Protection Law provides for joint liability for producers, manufacturers, importers and distributors associated with the tradmark of a product or service, where damage has occurred due to a defect in the goods or service. This rule extends to anyone whose participation has some influence on the damage caused.
The law also provides that an action for the restoration of a paid value (ie, with regard to defective goods that were manufactured using the licensed technology) may only be brought against the final seller. The carrier (eg, importer or distributor) shall be liable solely for damages caused to the product as a result of the service rendered by the carrier.
For further information on this topic please contact Maria Cecilia Romoleroux at Bustamante & Bustamante by telephone (+593 2 562 680) or by fax (+593 2 564 628) or by e-mail ([email protected]).
The materials contained on this web site are for general information purposes only and are subject to the disclaimer.