Q&A: key IP issues affecting licensing agreements in Spain

Overview

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 in order for individuals or legal persons to perform any transactions of a fiscal or relevant nature in Spain. A NIF is required to form a company and to file or obtain certain documents that are requested or issued by the Spanish public authorities. Consequently, foreign licensors and joint ventures involving a foreign licensor would likely be required to obtain the same from the Spanish Tax Agency.

Non-resident foreign nationals intending to enter Spain to 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 Spanish investment funds, 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 conducted in Spain that is deemed and proved to be of general interest, with one of the following conditions having to be met 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 may appoint or remove a majority of the members of the board.

Kinds of licences

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.

Under 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 law.

Thus, 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 (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.

The Spanish Patent Act, Law No. 24/2015 of 24 July 2015, entered into force in 2017, 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 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 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.

The national authorities entitled to grant compulsory licences are the government using 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

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 rule 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. In 2022 the Spanish Tax Agency launched its ‘360° transfer pricing strategy’, which consists of an automated risk analysis system based on the interrelation of all available information on related-party transactions. In this way, self-assessment actions and consistency in the information provided to the AEAT become even more important.

In addition, and taking into account EU case law that reinforces the application of anti-abuse measures, the inspection will ensure the correct application of these rules in relation to the application of exemptions on dividend, interest and royalty payments to non-residents.

What pre-contractual disclosure must a licensor make to prospective licensees?

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, in which the franchisor shall provide the franchisee certain information in writing (ie, identification details of the franchisor, proof of ownership of the assets subject to license in Spain, general description of the branch of business, franchisor background, content and characteristics of the franchise and its exploitation, structure and organisation of the franchise and essential terms of the franchise agreement). 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 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.

It is also important and advisable to evaluate all information about the intellectual property rights at issue by subjecting them to a due diligence process.

Disclosure or registration of a licence agreement is not compulsory under Spanish law.

Are there any requirements to register a grant of international licensing rights with authorities in your jurisdiction?

Disclosure or registration of a licence agreement is not compulsory under Spanish law. There are no requirements to register a grant of international licensing rights in Spain.

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. In detail:

• 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 in Spain.

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 intellectual property rights (IPRs) or registrations in Spain while the contract is in force. However, this could give rise to antitrust issues. 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 in our jurisdiction.

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 the European Court of Justice's decision of 7 July 2016 on the C-567/14 (Genentech) case, the invalidity or expiration of an IPR does not affect the validity of a licence agreement. According to this decision, provided that licensee is able to terminate the agreement by giving reasonable notice, an IPR licensing agreement will still be in force regardless of the validity of the right.

If the licence agreement involves 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, should the licence expire for any of the circumstances referred to above, the licensee and third parties would freely use the relevant rights without paying any royalties.

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 since 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 chattel mortgage (not a security interest) over IPRs; in particular, in Chapter VI of the said Act.

First, article 45 sets object and subject limitations. The ability to create a chattel mortgage is only provided to the owner of the rights and to licensees enabled to assign their position as licensee of the IPRs at issue. Chattel mortgages cannot be granted over IPRs that are recordable but not registered, excluding therefore non-registered industrial designs, non-transferable rights, rights lacking patrimonial value and, in general, those not subject to individual appropriation; however, applications can be subject to mortgage. 

There are two main requirements to be met to take a chattel mortgage on IPRs in Spain:

• its constitution by means of a public deed; and
• its registration before section 4 of the Movable Assets 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 IPR in its correspondent register;
• licences, authorisations or concessions granted by its owner to any third party over the right; and
• proof of payment of the correspondent register fees and taxes fees, where applicable.

Requirements of the final two points 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 chattel mortgage directly before the SPTO or the Copyright Register is simply not feasible unless it has first complied with the exposed procedure.

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, 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 outlined 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. Actually, it is not required to register a licence for an EU trademark for the licensee to be able to bring proceedings for infringement (Judgment of the Court of Justice of 4 February 2016, Hassan (C-163/15).

In fact, it is important to note the different perspectives of an exclusive licensee and a non-exclusive licensee.

Exclusive licensees of IPRs can freely institute proceedings for infringement unless otherwise provided in the licence agreement.

Non-exclusive licensees, however, 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.

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?

Regarding 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 the 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 on his or her own accord to protect a trademark but shall make appropriate notification to the other joint owners so that they may be a 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 to 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 the 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 Spanish 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 joint 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.

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.

Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

Software could be protected by patents if and when it is part of a software-implemented invention. Software as such cannot be protected by patents but by copyrights and, eventually as part of trade secret.

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. Also, neither essentially biological processes to produce plants or animals, nor methods of surgical or therapeutic treatment of the human or animal body, nor the human body in the different stages of its constitution and development, nor a simple deoxyribonucleic acid (DNA) sequence with no indication of biological function can be protected by patents.

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?

Yes, indeed. Law 1/2019 of 20 February, on Trade Secrets, which transposes into Spanish law Directive (EU) 2016/943 of the European Parliament and of the Council on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

The law defines as trade secret any information or material contained in a document, including technological, scientific, industrial, commercial, organisational or financial knowledge that meets the following conditions:

• to be secret, meaning that, as a whole or in the precise configuration and assembly of its components is not generally known to, or easily accessible by, persons belonging to circles in which the type of information or knowledge in question is normally used;
• to have a business value, whether actual or potential, precisely because it is secret; and
• having been subject of reasonable measures by its owner to be maintained in secret. There are a number of measures that can be taken to protect know-how information: classifying information, restricting physical and logical access, establishing information transfer and media management policies, establishing policies for the use of computer systems, cybersecurity measures, signing confidentiality agreements specifying which information is protected, among others (Resolution of the General Directorate of Registries and Notaries of 4 December 2019).

Unlike patents, trade secrets are protected without registration.

A trade secret can be protected for an unlimited period of time provided that the requirements above are met and the secrets are not revealed, disclosed in public or independently developed by a third party.

The treatment by the courts differs, as these cases are usually difficult to demonstrate because evidence is scarce.

Nevertheless, industrial or commercial espionage, breach of contract, breach of confidence and inducement to breach are generally considered to constitute unfair practices with respect to secret information; depending on the nature of the conducts involved civil or criminal law would apply.

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. Under Law 1/2019 of 20 February, on Trade Secrets (article 2), obtaining the information constituting the trade secret is legal when the discovery is either: (1) independent; (2) the result of a process of observation or study of a product or object that is part of the public domain; (3) the result of the exercise of the right of workers and its representatives to be informed and consulted; or (4) the result of any other action that is made in accordance with fair commercial practices, including the transfer or assignment, and the contractual licence of the trade secret. In the previous cases, the licensee would be free to disclose the 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. However, the parties, under the freedom of contract, could agree on other terms (ie, the parties could regulate the acquisition by the licensor of the improvements by the licensee).

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 dramatic-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.

Software licensing

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. However, automatic renewals or very long defined terms of duration are allowed. In fact, it is very common to set very long licensing terms in copyright, such as 'the entire period of protection granted by the law to the licensed work'.

Are there any legal requirements to be complied with prior to granting software licences, including import or export restrictions?

There are no legal requirements to be complied with prior to granting software licences. There are no import or export restrictions, except for those deriving from defence matters.

Are there 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 intellectual property right 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 intellectual property 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 those actions are acceptable without any permission if they are needed to use the program in accordance with its intended use. Reproduction and transformation will be legitimate if they are needed to achieve the software’s interoperability.

Article 100.2 clearly states 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 provision 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 that program.

Additionally, if no express prohibition is set in the licensing contract, the licensee can 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.

On the other hand, late payment interests on commercial transactions are regulated in article 7 of Law 3/2004, of 29 December, which in 2022 – at least in the first semester – is 8 per cent.

Are there any restrictions on transfer and remittance of currency in your jurisdiction? Are there any associated regulatory reporting requirements?

In relation to the associated reporting requirements, Law 7/2012, of October 27, for the intensification of actions in the prevention and fight against fraud, established a series of limits on the operations from which the transaction must be reported, in order to fight against money laundering crimes.

• banking transactions exceeding €10,000. This category includes bank transfers;
• transactions in which €500 banknotes are exchanged, regardless of the amount;
• payments and collections for more than €3,000, provided they are made in cash; and
• loans and credit for more than €6,000.

Once we exceed any of these limits, the banking entities will be obliged to inform the Tax Agency, especially in cash receipts or transfers received from abroad.

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. Regarding 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 if 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

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 under 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 certain practices.

First, the Spanish Civil Code prohibits agreements of any kind to be of indefinite duration.

Second, there are no express limitations to exclusivity, internet sales prohibitions, non-competition restrictions and grand back provisions in the Spanish legislation. However, these clauses could be null and void if they are considered contrary to European competition law. To determine whether this is the case, such clauses would have to be examined on a case-by-case basis.

Internet sales prohibitions are considered hardcore restrictions according to Commission Regulation (EU) 330/2010 and, therefore, are not exempt from the application of article 101 of the Treaty on the Functioning of the European Union, that is, banned. However, the European Court of Justice has considered (Case 230/16 Coty) that online sales may be restricted in selective distribution agreements for luxury products if the restriction is aimed at preserving the trademark image and provided there are alternative online channels to be used.

Have courts in your jurisdiction held that certain uses (or abuses) of intellectual property rights have been anticompetitive?

Spanish courts have established that intellectual property rights (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 General Society of Authors and Publishers (SGAE) 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.

Likewise, we must highlight the fact that the CNMC (National Commission of Markets and Competition) fined SGAE in 2019 for abusing its dominant position in the management and exploitation of intellectual property rights of authors and publishers of musical and audiovisual works for a total of €2.95 million. Abuse occurs by imposing contractual conditions that oblige the author to entrust the management of all the rights of his works to it, as well as by requiring the joint sale of authorisations for the reproduction and public communication of musical and audiovisual content.

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 – for determining compensation of damages. The Spanish system is consequently different from 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.

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.

Termination

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.

Spanish law has no specific provisions in this regard. However, 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.

On another note, regarding the right to terminate, where intellectual property works are involved article –48 bis of Spanish Intellectual Property Law provides that and author may terminate – in whole or in part – the authorisation or assignment of rights granted over a work on an exclusive basis, if the work is not being exploited or, alternatively, the author may terminate the exclusivity of the contract.

This right may be exercised, subject to prior notice, after five years have elapsed from the authorisation of the rights, provided that there is no express agreement to that effect, collective bargaining agreement or sectoral agreement regulating the exercise of this right. In that case, such term shall not be less than one year. It should be noted, however, that computer programs and collective and collaborative works are excluded from this right.9.2. 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, 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.

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 Royal Legislative Decree 1/2020, of 5 May, approving the restated text of the Spanish Bankruptcy Act, 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 156 of the Royal Legislative Decree 1/2020, 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 to terminate it before the bankruptcy and remove the licensee’s rights based on breach of a contractual duty by the licensee rather than on its insolvency.

Even so, we must bear in mind that if there has already been a default in the payment of the royalty, it may be that this default is prior to the insolvency proceeding: it is possible to terminate the licence, being as we have said a contract of successive tract. Or it may be a non-payment also subsequent to the declaration of the insolvency proceedings, in which case it is also possible to terminate the contract. But in both cases, in order not to leave the licensee without activity, the Court may still impose the fulfilment of the contract and the validity of the licence (judgment of the Spanish Supreme Court of March 21, 2012).

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?

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 117, 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 117 of the Patent Act, being able to decide in any case the insolvent entity whether or not he or she is able in the 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.

In view of the above, reference should be made to the fact that the government has extended the insolvency moratorium, which means that bankruptcy cannot be declared until 30 June 2022, pending the new Insolvency Law.

Governing law and dispute resolution

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 (eg, 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.

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 must 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 intellectual property (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 Spanish Patent and Trademark Office (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 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. 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, under 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: '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 must adhere 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 Centre 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 Centre.

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 and the number of arbitrators) can waive their entitlement to claim specific categories of damages.

Updates & Trends

Please identify any recent developments in laws or regulations, or any landmark cases, that have (or are expected to have) a notable impact on licensing agreements in your jurisdiction (including any significant proposals for new legislation or regulations, even if not yet adopted). Explain briefly how licensing agreements might be affected.

The government has recently approved Royal Decree-Law 24/2021 amending the Intellectual Property Law to incorporate European Directives 2019/789 and 2019/790.

The Royal Decree seeks to ensure a high level of protection of intellectual property rights with the aim of adapting the legal system to the development of technologies and the Internet.

The following changes can be highlighted as to this chapter:

• In the case of licensing agreements, it strengthens the position of authors and performers, who under Spanish law already have the a right to a fair remuneration, with the incorporation of new legal tools such as, for example, the right to revoke the assignment of their works, which is granted under certain conditions to authors, artists and performers, the right to review their remuneration if it is disproportionately low; and the obligation of transparency imposed on assignees and licensees of rights with respect to authors, artists and performers.

Service providers shall, where licensing agreements are concluded, provide information on the use of the contents covered by such agreements between service providers and right-holders.

• The assignee of exploitation rights or holder of an authorisation for the use of a work or performance or of a repertoire administered by an intellectual property rights management entity must provide authors or performers, at least once a year and by electronic means, with updated information on the exploitation of their works or performances, especially as regards the modes of exploitation, the total income generated and the corresponding remuneration.

Law stated date

Give the date on which the information above is accurate.

31 March 2022