Are there any restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor and are there any restrictions against a foreign licensor entering into a licence agreement without establishing a subsidiary or branch office? Whether or not any such restrictions exist, is there any filing or regulatory review process required before a foreign licensor can establish a business entity or joint venture in your jurisdiction?
Foreign licensors and joint ventures involving a foreign licensor can do business in Spain to the extent allowed to Spanish nationals. Filing or regulatory review processes are not required.
However, under Spanish law, a personal tax identification number (NIF) is required by individuals or legal persons to perform any transactions of a fiscal or relevant nature in Spain. A NIF is required in order to form a company and to file or obtain certain documents that are required or issued by the Spanish public authorities. Consequently, foreign licensors and joint ventures involving a foreign licensor would likely be required to obtain same from the Spanish Tax Agency.
Non-resident foreign nationals intending to enter Spain for the purpose of making a significant capital investment may apply for a stay visa or, where applicable, a residence visa for investors.
For a capital investment to be considered as significant, one of the following criteria must be fulfilled:
- an initial investment of a value equal to or greater than €2 million in Spanish government debt securities, or a value equal to or greater than €1 million in stocks or shares of Spanish companies, or bank deposits in Spanish financial institutions;
- the acquisition of real estate in Spain of an investment value equal to or greater than €500,000 per applicant; or
- a business project intended to be carried out in Spain that is deemed and proved to be of general interest, with one of the following conditions having to be met in order for it to be considered as such:
- the creation of jobs;
- the investment will have a relevant socio-economic impact on the geographical area in which the activity will be carried out; or
- a significant contribution to scientific or technological innovation.
A foreign national applying for a visa will likewise be understood to have made a significant capital investment when the investment is made by a legal person established in a territory that is not considered a tax haven under Spanish law and in which the foreign national directly or indirectly holds a majority of the voting rights and has the powers to appoint or remove a majority of the members of the board.
Kinds of licences
Forms of licence arrangement
Identify the different forms of licence arrangements that exist in your jurisdiction.
Spain’s businesses are involved in international trade, and international practices have an impact on the Spanish way of doing business.
By virtue of the principle of contractual freedom, in Spain there are many forms of licence arrangements that parties may wish to enter into, provided that the subject matter is not contrary to Spanish law.
Thus, in Spain there are different forms of licence arrangements, including, but not limited to, the following:
- technology transfer licensing, including patent, utility model and know-how licensing;
- trademark and trade name licensing;
- intellectual property rights (IPRs) (copyright) licensing (including software, music, plays, etc);
- material transfer agreements (that usually involve a royalty-free, research-only licence regarding the material in question);
- design licensing;
- celebrity or character image rights licensing;
- franchise agreements (which include a strong set of licences, including trademarks, trade dress, know-how); and
- plant varieties licensing.
In April 2017, the new Spanish Patent Act, Law No. 24/2015 of 24 July 2015, entered into force bringing with it some new provisions regarding the compulsory grant of patent licences. The relevant legislation rests with articles 90 to 101 of the Spanish Patent Act, Law No. 24/2015 of 24 July 2015, and provides the following the legal grounds for granting compulsory licences are stipulated as being the following:
- national or public interest (national security, national defence, public interest or protection of the natural environment);
- lack or insufficiency of exploitation after the expiration of four years from the filing date of the patent application, or three years from the publication date of its concession in the Spanish Industrial Property Official Bulletin;
- as a remedy to anticompetitive practices when an administrative or judicial decision states there has been a violation of a competition right by the owner of the patent;
- manufacture of medicinal products intended for countries with public health problems as a result of the application of Regulation (EC) No. 816/2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems; and
- where a patented invention cannot be exploited without infringing a patented invention with a better priority.
In Spain, the national authorities entitled to grant compulsory licences are the government by means of Royal Decree, as proposed by the Ministry of Industry, Tourism and Commerce, the Ministry of Health, the Ministry of Defence and the National Competition Commission.
Law affecting international licensing
Creation of international licensing relationship
Does legislation directly govern the creation, or otherwise regulate the terms, of an international licensing relationship? Describe any such requirements.
Under Spanish law, there is no legislation governing the creation of the terms of an international licensing relationship. However, competition law could affect this, as could the Tax Agency’s rules on transfer pricing.
In fact, the Spanish tax authorities have expressed concerns with respect to transfer pricing issues and have increasingly been paying attention to transfer pricing issues during tax audits.
What pre-contractual disclosure must a licensor make to prospective licensees? Are there any requirements to register a grant of international licensing rights with authorities in your jurisdiction?
There are no express legal requirements regarding pre-contractual disclosure from a licensor to its prospective licensees, except for in the case of franchise agreements.
Thus, in principle, it would be for the licensor and licensee to decide the extent to which they want to explore pre-contractual disclosure. However, in Spain there is a general contractual principle of good faith, which is more a general obligation to inform the other party of the risks that might affect performance in order to avoid misrepresentation.
Separately, depending on the nature of the information to be disclosed on a pre-contractual basis, it would be advisable to enter into a non-disclosure agreement.
Disclosure or registration of a licence agreement is not compulsory under Spanish law.
Are there any statutorily- or court-imposed implicit obligations in your jurisdiction that may affect an international licensing relationship, such as good faith or fair dealing obligations, the obligation to act reasonably in the exercise of rights or requiring good cause for termination or non-renewal?
In Spain, there are general contractual principles that would apply to contractual matters such as international licensing relationships (should Spanish law be applicable as per the conditions set forth in the agreement). Among them are freedom of contract, unilateral termination in the case of contracts of indefinite duration, duty of good faith and, in very limited cases, the possibility of a party petitioning a court for the modification of the terms of the licence: a clausula rebus sic stantibus.
Intellectual property issues
Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?
Yes. Spain is a party to the following:
- Spain signed the Paris Convention for the Protection of Industrial Property 1883 on 20 March 1883; ratification took place on 6 June 1884 and it entered into force in Spain on 7 July 1884;
- Spain became bound by the Patent Cooperation Treaty 1970 on 16 November 1989; and
- the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 has been in force since 1 January 1995.
Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?
The licensee can contractually agree not to contest the validity of a foreign licensor’s IPRs or registrations in Spain while the contract is in force. However, this could give rise to antitrust issues. In order to achieve a similar result, it might be advisable to draft it as a right of the licensor to cancel the licence should the licensee effectively contest the validity of the licensor’s IPRs.
We are not aware of any case where a clause such as the one in the question has had to be enforced.
Invalidity or expiry
What is the effect of the invalidity or expiry of registration of an intellectual property right on a related licence agreement in your jurisdiction? If the licence remains in effect, can royalties continue to be levied? If the licence does not remain in effect, can the licensee freely compete?
Following a final decision that invalidates an IPR or declares that it has expired, the agreement becomes devoid of content and, consequently, can be considered as terminated and no further royalties shall be paid.
Should the licence agreement involve additional rights, the contract would remain effective in respect of said additional rights, but the royalties would have to be renegotiated and previous amounts would not be refunded (as the right that has been invalidated or has expired was in force at the time), unless otherwise agreed.
Last but not least, if the licence does not remain in effect for the circumstances referred to above, the licensee, as well as any third parties, can freely compete without paying any royalties.
Requirements specific to foreigners
Is an original registration or evidence of use in the jurisdiction of origin, or any other requirements unique to foreigners, necessary prior to the registration of intellectual property in your jurisdiction?
Foreign nationals can freely apply for the registration of trademarks, patents, utility models, designs, plant varieties and copyrights. There are no requirements unique to foreign nationals in Spain. However, it should be noted that Paris Convention priority applies in Spain; those claiming such priority must provide evidence of their original right.
Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?
Unregistered IPRs can be licensed. However, unregistered trademarks are alien to the Spanish Trademark Act, where acquisition of rights by registration is the general rule. Copyright and unregistered designs and know-how are protected without registration. In any event, as the licensee’s position would be somewhat weak, the contract should contain some information on warranties as to the peaceful enjoyment of the rights.
Are there particular requirements in your jurisdiction to take a security interest in intellectual property?
The Spanish Chattel Mortgage and Non-Possessory Pledge Act of 16 December 1954 establishes the conditions to be met to take out a security interest over intellectual property rights, in particular, in Chapter VI of the said Act.
First, article 45 sets object and subject limitations. The ability of creating a security interest is only provided to the owner of the rights and to licensees enabled to assign their position as licensee of the IP rights at issue. Security interests cannot be granted over IP rights that are recordable but not registered, excluding therefore non-registered industrial designs.
There are two main requirements to be met in order to take a security interest in IP rights in Spain:
- its constitution by means of a public deed; and
- its registration before section four of the Chattel Mortgage Registry.
For any pledge to be effective regarding third parties in Spain, it must be entered in the aforementioned Registry.
Regarding the constitution of a public deed, this shall contain, in addition to the requirements demanded to any chattel mortgage, as per article 47:
- nature, kind and any other characteristics of the rights affected;
- date and number of registration, renewal, reinstatement or extension of the IP right in its correspondent register;
- licenses, authorisations or concessions granted by its owner to any third party over the right; and
- proof of payment of the correspondent fees, where applicable.
Requirements at points three and four above can be met with the file certificate to be issued by the Spanish Patent and Trademark Office (SPTO) or the Copyright Register.
Once the public deed is duly recorded before the Registry of Movable Goods, the registrar will automatically submit certification of its content to the SPTO or to the Copyright Register. Record of a security interest directly before the SPTO or the Copyright Register is simply not feasible unless it has first complied with the exposed procedure.
Proceedings against third parties
Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?
Generally speaking, the owner or licensor of the IP can institute proceedings for infringement in Spain independently, without joining the licensee.
However, this could be adjusted via the conditions set forth in the licence agreement, in which the parties can provide that:
- both parties shall institute proceedings jointly;
- only the licensor shall institute proceedings; or
- the licensee shall be entitled to institute proceedings on its own.
As a matter of fact, it is important to bear in mind the different perspectives of an exclusive licensee and of a non-exclusive licensee.
Exclusive licensees of IP rights (IPRs) can freely institute proceedings for infringement, unless otherwise provided in the licence agreement.
Non-exclusive licensees, on the other hand, would always require the owner’s prior consent. However, if the licensor is the only one entitled to institute proceedings and fails to do so following the request of the licensee, and by doing so causes harm to the licensee, the latter would be entitled to bring action against the third party that is infringing the IPR.
Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?
The Trademark Act expressly indicates that a licensee cannot sub-license the use of a trademark or service mark to a third party unless the parties have expressly agreed to this in the licence agreement. Thus, the right to sub-license must be granted contractually.
Jointly owned intellectual property
If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?
In regard to the co-ownership of an exclusive right, it differs depending on the IPR in question. Although patents, trademarks and copyrights are regulated in three different legal instruments, there is a very similar regulatory framework for this specific topic.
On the one hand, the Trademark Act when dealing with the exclusive right as the subject matter of property rights says that a trademark right or application may belong pro indiviso to two or more persons. The resulting common property shall be governed by the terms of agreement between the parties, failing that by the provisions of article 46.1 of Spanish Trademark Act, Law No. 17/2001, and, in the final instance, by the provisions of the Spanish Civil Code on common ownership of property.
The granting of licences and the independent use of the trademark by each participant shall be agreed in accordance with jus commune standards. Thus, each participant may take civil and criminal action by his or her own to protect a trademark but shall make appropriate notification to the other joint owners so that they may be party to such action and contribute to the payment of the expenses incurred.
In the case of a transfer of a trademark or a share, a participant may exercise his or her right of prior purchase within a period of one month from the time when he or she was notified of the purpose and conditions for the implementation of the transfer. Where prior notification is not given or if a transfer is made in a manner different from the one indicated in such notification, a participant may exercise his or her right to withhold his or her share, within the same period from the time of publication of the recording of the transfer in the Register of Trademarks. Such absolute and unjustified opposition of a participant to the use of a trademark as might cause the trademark to be declared lapsed shall be deemed, for all purposes, to constitute renunciation of his or her right.
On the other hand, when dealing with patents, Spanish Patent Act, Law No. 24/2015, establishes some differences in relation with those stated in the Trademark Act. This Act states that each party acting alone may freely dispose of the portion corresponding to him or her, notifying the other joint owners that they can exercise the rights of first refusal and pre-emption. The right of first refusal can be exercised within two months from the sending of the notification, and the right of pre-emption shall be exercised within one month from the entry of the sale in the Patent Register.
Each owner can also exploit the invention after notifying the other joint owners, perform such acts as may be necessary to preserve the application or patent, bring civil or criminal proceedings against any third party infringing in any way the rights deriving from the jointly owned application or patent. This party bringing such action is obliged to notify the other joint owners of the action brought so that they may join in the action.
A licence to a third party for the exploitation of the invention must be granted jointly by all the joint owners, unless the court authorises one of them to do so for reasons of equity in view of the circumstances of the case.
Both jointly owned trademarks and patents are considered as a community of assets as regulated in the Civil Code. Article 400 of the Civil Code states that an agreement regarding the maintenance of these kinds of communities cannot exceed a 10-year term. Therefore, regardless of the terms legally granted to mentioned IPRs, any co-ownership agreement affecting such rights cannot surpass the 10-year duration, even though it might be renewed in order to cover the totality of the life of the right. Although this interpretation of the Civil Code has not been confirmed by the case law on trademark and patents, it has been acknowledged by the courts in other issues.
Last, the Copyright Act distinguishes between ‘works of joint authorship’ and ‘collective works’.
When regulating the works of joint authorship the Copyright Act, Law No. 1/1996, affirms that those are the works obtained as the unitary result of the collaboration of two or more authors, which shall belong to all of them, in the proportions determined by them all. Any alteration of the work shall require the consent of all the co-authors. If there is a lack of agreement among the owners, the court of law shall decide. Every co-owner in this case may exploit their contribution separately insofar as the join exploitation is not thereby prejudiced.
The Copyright Act distinguishes the above-mentioned from collective works, which are those created on the initiative and under the direction of an individual or legal person, who edits it and publishes it under his or her name, and where it consists of the combination of contributions by various authors whose personal contributions are so integrated in the single, autonomous creation for which they have been conceived that it is not possible to ascribe any one of them a separate right in the whole work so created.
In the absence of an agreement in this regard, the rights in the collective work shall vest in the person who publishes it and discloses it in his or her name.
First to file
Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?
Spain is a ‘first to file’ jurisdiction.
Patent applications are rights in themselves that can be subject to contractual operations, including licence agreements. However, in this case, the parties should be careful as regards the scope of the licence, warranties as to the suitability and the free exploitation of the invention, etc.
Scope of patent protection
Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?
When software is part of a software-implemented invention it can never be protected by patents.
Business processes or methods cannot be protected by patents as such, but as a method incorporated into an invention in order to implement same, they could be somewhat protected.
Living organisms can be protected by patents, but animal and plant varieties cannot be subject to a patent.
Trade secrets and know-how
Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?
Spain does not have ad hoc legislation on trade secrets in force at the moment. Spain relies heavily on unfair competition law, IP, labour law and criminal legislation. Nevertheless, at the moment the transposition of Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure is pending. The Trade Secrets Act draft bill is pending; thus, Spain will soon have specific legislation in this matter. The current draft bill includes a definition which is almost identical to the one set by the Directive and, since no amendment to said definition has been proposed, it shall remain with its current wording. Additionally, the current draft bill departs from the Directive including a chapter dedicated to the trade secret as the subject matter of a property right, being a remarkable and useful addition. It shall be noted that the aforementioned Directive of 9 June 2018 as the limit transposition date, therefore, the Directive may be invoked before Spanish Courts from that date and until the approval of the Trade Secrets Act.
There is no formal definition of a trade secret in Spanish law. However, that definition can be found in the EU Guidelines on Vertical Restraints and the EU Regulation on Technology Transfer Agreements, as well as in TRIPs. Case law and legal doctrine have adopted that definition.
The treatment by the courts differs, as these cases are usually difficult to demonstrate because evidence is scarce.
Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the licence agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?
Yes. It must be borne in mind that trade secrets and know-how can become part of the public domain during and after the term of the licence agreement, in which case, the licensee would be free to disclose same.
Improvements made by the licensee belong to same, and so restrictions on disclosure would not be allowed, to the extent that the licensor’s core trade secrets as such are not disclosed. Such a restriction could have an antitrust impact and should be avoided.
What constitutes copyright in your jurisdiction and how can it be protected?
Spain is an ‘author’s rights’ jurisdiction, which means that it is part of the European legal tradition that focuses both on exploitation rights and moral rights.
All literary, artistic or scientific creations expressed in any medium are protected works under Spanish law, and they include:
- books, pamphlets, writings, addresses, lectures, judicial reports and other works of the same nature;
- musical compositions with or without words;
- dramatic and dramatico-musical works, choreographies, mime and theatrical works in general;
- cinematographic works and any other audiovisual works;
- sculptures, drawings, paintings, engravings, lithographs, cartoons and comics, as well as their preparatory work and any other physical work;
- projects, plans, models and designs of architectural and engineering work;
- graphs, maps and pictures relating to topography, geography and science in general;
- photographs and analogous works;
- computer programs;
- derived works (translations and adaptations, revisions, updates and notes, compilations, abstracts and extracts, musical arrangements and any other transformation of a work);
- databases; and
- collections of works (anthologies).
Cinematographic works, other audiovisual works and computer programs are subject to a slightly different treatment from other types of work.
Original works are granted protection by the mere act of creation, regardless of the nationality of the author or the place of publication. Registration is not required and does not constitute rights; it only creates evidence as to the existence, content and ownership of the work at a certain time. This evidence can be contested at any time by registered and unregistered works. Notarial deposits serve the same purpose and are used by rightsholders as well, but they lack the publicity factor of a public register.
Perpetual software licences
Does the law in your jurisdiction recognise the validity of ‘perpetual’ software licences? If not, or if it is not advisable for other reasons, are there other means of addressing concerns relating to ‘perpetual’ licences?
Under general Spanish law, as interpreted by case law, perpetual obligations are forbidden. An equivalent effect would be obtained by indicating that licences will lapse upon expiration of legal rights. As regards perpetual software licences, these are interpreted as being similar to purchase contracts and are therefore valid.
Are there any legal requirements to be complied with prior to granting software licences, including import or export restrictions?
There are no particular requirements to be complied with prior to granting software licences. There are no import or export restrictions, except for those deriving from defence matters.
Restrictions on users
Are there any legal restrictions in your jurisdiction with respect to the restrictions a licensor can put on users of its software in a licence agreement?
Contractual practice, including IPR licences, is governed by the respect to the will of the parties. However, article 100 of the Spanish Copyright Act imposes a few limitations to the IP of the owner that shall be extended to any licensing contract. Software is protected by copyright since it is considered a multimedia or literary work. Therefore, it cannot be protected per se as a patent, although computer software implemented inventions are admissible.
Even though a licence agreement may not permit the reproduction or the transformation of the computer program by the licensee, article 100 states that said actions are acceptable without any permission if they are needed in order to use the program in accordance with its intended use. Reproduction and transformation will be legitimate if they are needed in order to achieve the software’s interoperability.
Article 100.2 clearly sets that the legitimate user or licensee has a right to make a backup copy of the program that cannot be contractually restricted or waived. Therefore, any prevision in this sense will be null and void.
Reverse engineering is also allowed by article 100.3 as it affirms that the legitimate user can observe, study or verify the functioning of the software without authorisation whenever it is done during loading, visualisation, execution, transmission or storage of said program.
Additionally, if no express prohibition is set in the licensing contract, the licensee is able to make successive versions of the software or derivative works of same.
Further, article 43 of the Copyright Act states some basic provisions that an agreement of this kind shall contain, not just being applicable to software licence but to any copyright licensing agreement. It is stated that the exploitation rights will be limited to the means of exploitations expressly provided for, and the time and territorial scope specified. However, any general assignment of exploitation rights in all the works that the author may create in the future shall be null and void. Moreover, any stipulations whereby the author undertakes not to create any work in the future shall be null and void too. The assignment of exploitation rights shall not cover methods of use or means by dissemination that did not exist or were unknown at the time of the assignment.
Royalties and other payments, currency conversion and taxes
Is there any legislation that governs the nature, amount or manner or frequency of payments of royalties or other fees or costs (including interest on late payments) in an international licensing relationship, or require regulatory approval of the royalty rate or other fees or costs (including interest on late payments) payable by a licensee in your jurisdiction?
There is no legislation that governs the nature, amount, manner or frequency of payments or other fees or costs. The royalty rates or other fees and costs are not subject to approval either.
The parties’ freedom to contract would apply.
Are there any restrictions on transfer and remittance of currency in your jurisdiction? Are there are any associated regulatory reporting requirements?
Neither restrictions nor requirements apply.
Taxation of foreign licensor
In what circumstances may a foreign licensor be taxed on its income in your jurisdiction?
Under domestic law, the following income is held to be obtained in the territory of Spain: fees paid by persons or companies domiciled in Spain, by permanent establishments located in Spain or which are used in the territory of Spain. With respect to yields of that kind, domestic law provides for multiple exemptions.
If the foreign licensor is located outside Spain, only the income generated in Spain may be taxed.
Fees between associated businesses are exempt in the event that they are paid to a company domiciled in an EU member state or to a permanent establishment of that company located in another EU member state, provided that certain requirements are met.
Double taxation is not permitted by virtue of international treaties.
Competition law issues
Restrictions on trade
Are practices that potentially restrict trade prohibited or otherwise regulated in your jurisdiction?
Yes. Spanish legislation is fully harmonised with EU legislation.
EU competition law bans agreements that restrict competition and abuse of a dominant position. Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits any agreements that might affect trade between EU member states and anything that might prevent, restrict or distort competition. Agreements that create sufficient benefits to overcome effects that are contrary to competition shall be exempt from this prohibition pursuant to article 101(3) of the TFEU. The Competition Act, Law No. 15/2007 of 3 July 2007, contains the same principles, which are applicable where the conduct affects the Spanish market.
Consequently, practices that potentially restrict trade are prohibited and regulated in Spain. Among the practices that are prohibited or restricted are:
- directly or indirectly fixing purchase or selling prices or any other trading conditions;
- limiting or controlling production, markets, technical development or investment;
- sharing markets or sources of supply;
- applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; and
- making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject matter of such contracts.
Are there any legal restrictions in respect of the following provisions in licence agreements: duration, exclusivity, internet sales prohibitions, non-competition restrictions and grant-back provisions?
There are indeed restrictions in respect of all the provisions referred to above, should they fall within the scope of the practices referred to in question 30.
In order to assess the impact of any such restrictions, the clauses and the agreement as a whole shall be analysed.
IP-related court rulings
Have courts in your jurisdiction held that certain uses (or abuses) of intellectual property rights have been anticompetitive?
Spanish courts have established the IPRs are limited by competition laws in some ways, since the granting of an exclusive right is a limitation to free competition. Some legitimate use of IPRs has been considered harmful to the market and contrary to competition law, since it restricts the normal activity of the market by creating a monopoly in a product that overrides the rules of free competition. One such use is related to selective distribution, where a trademark holder wishes to avoid the EU criteria on rights exhaustion by claiming infringement by a non-authorised reseller, and thus deter the resale of the previously marketed products. That opinion has been reflected in multiple decisions by the European Union Trademark Courts in Alicante, the most recent judgments being the ones rendered on 6 May and 22 April 2016. Regarding copyright, the Spanish Supreme Court considered, in 2008, that the Spanish Society of Authors and Publishers was carrying out contractual practices that were contrary to competition law, since they were using their monopolistic position to unilaterally establish the contracting conditions in their relations with some companies, forcing them to accept discriminatory conditions.
Indemnification, disclaimers of liability, damages and limitation of damages
Are indemnification provisions commonly used in your jurisdiction and, if so, are they generally enforceable? Is insurance coverage for the protection of a foreign licensor available in support of an indemnification provision?
The Spanish system is based on two principles - damnum emergens and lucrum cessans - in order to determine compensation of damages. The Spanish system is consequently different to the common law system of direct and consequential damages. Indemnification provisions, as well as penalty clauses, are used in our jurisdiction, and even though they can be enforceable, the judge retains the right to adjust them.
Insurance coverage for the protection of a foreign licensor is available in support of an indemnification provision.
Waivers and limitations
Can the parties contractually agree to waive or limit certain types of damages? Are disclaimers and limitations of liability generally enforceable? What are the exceptions, if any?
The parties are free to agree, by means of a contract, whether or not to waive or limit certain types of damages. However, should the damages result in the defaulting performance of one of the parties (in breach of the contract), the other party would be entitled to seek relief and compensation.
Disclaimers of liability are common in certain licensing arrangements (technology transfer agreements, material transfer agreements, etc) and are generally enforceable. The same is true for limitations of liability; they are usually enforceable and are often a clause in licence agreements. However, there are some exceptions. Damages caused by wilful intent or negligence cannot be waived (articles 1102 and 1103 of the Spanish Civil Code). There are also some cases where objective liability cannot be waived (eg, the rights held by consumers to obtain compensation for the damages sustained as a result of the use of a product or a service provision).
However, some situations, such as liability arising from a criminal offence and wilful misconduct, cannot be waived.
Right to terminate
Does the law impose conditions on, or otherwise limit, the right to terminate or not to renew an international licensing relationship; or require the payment of an indemnity or other form of compensation upon termination or non-renewal? More specifically, have courts in your jurisdiction extended to licensing relationships the application of commercial agency laws that contain such rights or remedies or provide such indemnities?
The parties’ freedom to contract in this case means that the parties can agree, should they consider it appropriate, to impose conditions or require the payment of indemnities, as detailed above.
Spanish law has no specific provisions in this regard. However, please note that competition law could apply.
Spanish courts have not extended the application of commercial agency laws to licensing relationships even though there have been discussions concerning this possibility in the case of a distribution agreement.
Impact of termination
What is the impact of the termination or expiration of a licence agreement on any sub-licence granted by the licensee, in the absence of any contractual provision addressing this issue? Would a contractual provision addressing this issue be enforceable, in either case?
Generally speaking, in the absence of any contractual provision, any sub-licences granted by the licensee would be terminated or would expire, as they are dependent on the main agreement. The freedom of the contracting parties is a rule of thumb in Spanish contractual law; thus, a contractual provision aimed at avoiding the lapse of a sub-licence agreement, or providing for its transformation into a licence agreement, would be perfectly enforceable, since the rightsholder is aware of that condition.
Impact of licensee bankruptcy
What is the impact of the bankruptcy of the licensee on the legal relationship with its licensor; and any sub-licence that the licensee may have granted? Can the licensor structure its international licence agreement to terminate it prior to the bankruptcy and remove the licensee’s rights?
The impact of the bankruptcy of the licensee on the legal relationship with its licensor would depend on the ability of the bankrupt company and sub-licensees to perform their duties under the agreement.
Under Spanish law, should one of the parties to a licence agreement become bankrupt, the agreement (and sub-licences thereof) would remain in force, as it would be considered an asset of the bankrupt party’s estate. The managers of the company would be replaced by receivers appointed by the court, and their duties would include preserving the assets so that the company could survive, and the creditors would be satisfied. It should be noted that the Spanish Bankruptcy Act, Law No. 22/2003, aims for an agreement to be reached between the insolvent party and the majority of its creditors, with the debtor’s objective being to continue to trade. Thus, the receivers would be entitled to declare their will to terminate the agreement and extend its validity.
On another note, article 61.3 of the Spanish Bankruptcy Act, Law No. 22/2003, states that any clauses providing for the termination of the agreement where either of the parties is declared bankrupt shall be considered void.
The licensor can structure its international licence agreement so as to terminate it prior to the bankruptcy and remove the licensee’s rights based on breach of a contractual duty by the licensee rather than on its insolvency.
Impact of licensor bankruptcy
What is the impact of the bankruptcy of the licensor on the legal relationship with its licensee; and any sub-licence the licensee has granted? Are there any steps a licensee can take to protect its interest if the licensor becomes bankrupt?
Without prejudice to what is mentioned in the previous question, which is valid for both parties in a licence agreement, we must differentiate here, in any case, if we are dealing with an exclusive or non-exclusive licensee.
The exclusive licensee has a direct and proper legitimacy to exercise the 14 actions that correspond to the owner to protect the patent, trademark or design before acts of infringement by third parties, while the non-exclusive licensee has subsidiary legitimacy to that effect, requiring the owner to exercise the corresponding defensive actions within three months, including the direct ability to request precautionary measures in case of emergency while the owner decides whether or not to defend his or her exclusive rights during that period (article 124 Patent Act). This means attributing to the exclusive licensee a reinforced position that grants them an autonomous right, a right different from that which the trademark, patent or design grants to the owner.
Consequently, being the exclusive licensee holder of an autonomous right derived from the licence, it will not need prior authorisation for the approach, obviously at his or her expense, of the defensive actions that he or she considers necessary before the infringement of third parties. The exclusive licensee is only required to communicate the exercise of this action to the insolvent licensor, as required by article 124.3 of the Patent Act, being able to decide in any case the insolvent entity whether or not he or she is part in said procedure to defend his or her interests in his or her own name.
If the licensee is not an exclusive one, the reasons that were previously pointed vanish, and this gives this licensee a legitimacy that is not its own or autonomous, but subsidiary.
It is the licensor (who may come tacitly or explicitly consenting to the infringing act) who must then file the corresponding actions to protect the intangible assets available to him or her.
If the debtor or, in its case, the insolvency administration does not choose to resort to the defensive actions of its industrial property assets, or does not do so in the three months following the notarial request that the licensee must make, the licensee can act in his or her own name, including the request of urgent precautionary measures beforehand, which then must be followed by the filing of a claim.
Governing law and dispute resolution
Restrictions on governing law
Are there any restrictions on an international licensing arrangement being governed by the laws of another jurisdiction chosen by the parties?
The parties are free to choose the laws of another jurisdiction, but in certain cases, given the connection of the licensing arrangement with Spain (eg, parties, performance), Spanish law would apply (taxation, employees’ inventions and competition law), notwithstanding the agreement between the parties. Furthermore, in business-to-consumer contracts, consumer protection laws may prevail over any governing law and dispute resolution clause.
Contractual agreement to arbitration
Can the parties contractually agree to arbitration of their disputes instead of resorting to the courts of your jurisdiction? If so, must the arbitration proceedings be conducted in your jurisdiction or can they be held in another?
According to our procedural law, parties can contractually agree to resort to arbitration instead of courts, even when the proceedings before the courts have already started. The parties are free to decide the jurisdiction and applicable law in the arbitration agreement. An arbitration has to be considered as international when the parties to an arbitration agreement have, at the time of such agreement, their respective domiciles in different states, or if the place of arbitration is located in a country other than that in which the parties have their domicile.
Arbitration as an alternative to court proceedings, is provided in all our IP national laws. It should be noted that in the new Spanish Patent Act, Law No. 24/2015 of 24 July 2015, the possibility to the parties to bring the conflict to the SPTO, as an arbitration body is provided. Since the reform made by the Act, Law No. 21/2014 of 4 November 2014, modifying the Spanish Intellectual Property Act, the actual version of the latter also mentions the possibility for the parties to submit their case to the Spanish Intellectual Property Commission, which is provided with arbitration services. The SPTO and the Spanish Intellectual Property Commission are national specified bodies that will bring very positive results to the alternative resolutions to court decisions in the IP sector.
Collective arbitration is regulated in Spain only where consumer rights are affected. Whenever a single situation has damaged the rights of a certain group of people and consumers’ collective interests might have been injured, a collective arbitration proceeding can be commenced in order to resolve, in a single procedure, the potential harm for every subject. There are regional and national arbitration bodies to settle these matters depending on the territorial scope of the affected rights. In order for the action to prevail, the companies involved shall adhere to the consumer arbitration system, which is proposed whenever a claim is sustained. Should the aforementioned companies fail to adhere to the consumer arbitration system, the arbitration is over, and the proceedings are terminated, and so the only option remaining is individual or class action before the Spanish civil courts.
Actions to protect collective interests refer to consumer law matters.
Article 10 of the Spanish General Law for the Protection of Consumers and Users provides that ‘the prior relinquishment of the consumer rights recognised by this law is null and void, as are acts carried out through the abuse of law, in accordance with the provisions of article 6 of the Civil Code.’ The basic rights of consumers include the entitlement to have their rights protected through effective means.
Article 86 of the aforementioned law, when describing unfair terms that restrict basic consumer rights refers, inter alia, to: ‘7. The imposition of any other waiver or limitation on the rights of consumers or users’.
As arbitration is a voluntary proceeding and the allegedly infringing company has to be adhered to the system, collective arbitration cannot be deemed as one of those rights, mainly because consumers can defend their rights through court proceedings. In conclusion, there are no specific requirements to be met by such a waiver.
The most popular and well-known arbitration institutions around the world are the London Court of International Arbitration, the International Center for Dispute Resolution of the American Arbitration Association, the Inter-American Commercial Arbitration Commission, the Stockholm Court of Arbitration, the Japan Commercial Arbitration Association and the China International Economic and Trade Arbitration Commission. Nonetheless, in IP matters, the most common arbitration institution is the World Intellectual Property Organization Arbitration and Mediation Center.
The most important arbitration bodies for the resolution of national conflicts are the Madrid Official Chamber of Commerce and Industry Arbitration Court, the Arbitration Court of Barcelona and the Spanish Chamber of Commerce Arbitration Court.
Would a court judgment or arbitral award from another jurisdiction be enforceable in your jurisdiction? Is your jurisdiction party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
Court judgments, as well as arbitral awards issued in another jurisdiction, are enforceable in Spain. However, they would have to undergo an exequatur process.
The law that governs this procedure varies depending on the origin of the judgment; whether it was from a state within the European Union or from another foreign court.
The parties shall request the exequatur and the judge may only assess whether or not the judgment or arbitral award may be enforced in accordance with Spanish law. For the decision to be recognised, it shall meet specific legal requirements, such as:
- the enforcement of the judgment must not be contrary to public policy;
- the defendant must have been summoned in due course before the court at the trial; and
- the enforcement must have been issued in pursuit of a personal action.
On another note, Spain has also been a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 since 12 May 1977. Consequently, the enforcement of an arbitral award, despite being subject to enforcement proceedings, is, in practice, much easier to obtain, because Spanish courts are favourable to enforcement.
Is injunctive relief available in your jurisdiction? May it be waived contractually? If so, what conditions must be met for a contractual waiver to be enforceable? May the parties waive their entitlement to claim specific categories of damages in an arbitration clause?
Injunctive relief is available in Spain and cannot be waived contractually.
The parties, when drafting an arbitration clause (eg, deciding the competent arbitral court, the language of the arbitration, the number of arbitrators, etc) can waive their entitlement to claim specific categories of damages.
Updates & Trends
Updates & Trends
Updates and trends
A Spanish Trade Secrets Act is currently in the approval process, and is aimed at being the first specific regulation on this matter in the Spanish legal system. Although this draft is subject to changes, it shall follow the main guidelines laid down by Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. This piece of legislation might eventually impact licences over trade secrets and know-how as it will establish an unprecedented definition of trade secrets that strictly follows the one proposed in the Directive, a chapter regulating the trade secret as subject matter of a property right, including an article covering licences (article 6 of the current draft), and additional actions for right holders to defend their assets.
Additionally, a new Spanish trademark act is being devised and is under discussion. Since it is currently a draft, it is too early to analyse its contents and its eventual impact on trademark licensing in Spain; however, its final approval will likely affect the Spanish trademark system and therefore, licensing. It shall be noted that this act will transpose Directive (EU) 2015/2436 to approximate the laws of EU member states relating to trademarks, thus, a new Spanish trademark act shall follow the guidelines set by the said Directive.