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

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. Thailand is a party to:

• the Paris Convention for the Protection of Industrial Property 1883;
• the Patent Cooperation Treaty 1970; and
• the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994.

Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

Thailand is generally a freedom-to-contract jurisdiction and, as such, the parties may essentially agree to have any term in the agreement, provided there is no unfair limitation on competition or violation of public policy. There are currently no laws or regulations regulating clauses that prohibit a licensee from contesting the validity of a foreign licensor’s trademarks.

However, Ministerial Regulations No. 25 (BE 2542) (1999), issued under the Patent Act, considers a clause that prohibits the licensee from challenging or raising a defence that the patent is invalid to be an unjustified contract term. Thus, it would not be permissible for the parties to mutually agree and be bound by contracts that prohibit a licensee from challenging the validity of the licensed patents or the secrecy of know-how, during the term of the agreement and thereafter.

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?

The Thai Trademark Act BE 2534 (1991), as amended by the Trademark Act (No. 2) BE 2543 (2000) and Trademark Act (No. 3) BE 2559 (2016), stipulates under section 76 that ‘if a trademark registration is cancelled, the licensing of such a trademark shall also cease to have effect’.

It can be implied from the above section that the invalidity or expiry of registration of a licensed trademark would affect the validity of the related licence agreement. However, since Thailand values freedom of contracting parties, the law does open rooms for the parties to agree for the licence to remain in effect even after the expiration of the licensed trademark. This is confirmed by section 78, which stipulates that ‘if not otherwise provided in the licence agreement, the licensee shall have the right to use the trademark . . . for the entire term of the trademark registration and its renewals’.

Regarding patents, the parties are free to determine the duration of the licence, as well as the circumstances under which either party may terminate the contract, subject to the restrictions stipulated in the Unfair Contract Terms Act and in the sections of Ministerial Regulation Number 25 (BE 2542) (1999). In any case, section 39(2) of the Thai Patent Act, as amended by the Patent Act (No. 2) BE 2535 (1992) and the Patent Act (No. 3) BE 2542 (1999), states that ‘the patentee shall not require the licensee to pay royalties for the use of the patented invention after the patent has expired’. The consequence of conditions, restrictions or licence terms concerning royalties that are contrary to the provisions of this section shall be considered null and void.

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?

No. An original registration or evidence of use in the jurisdiction of origin is not required for registration of intellectual property rights (IPRs) in Thailand. There are also no requirements that are unique to foreigners, except for the fact that powers of attorney and other documents to be signed by IPR holders who are foreigners must be notarised, whereas powers of attorney from local entities do not need notarisation.

Furthermore, foreign applicants need to appoint a local representative to pursue registration of IPRs in Thailand.

Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

Section 68 of the Thai Trademark Act makes it compulsory to register the licence agreement of a registered trademark with the Thai Trademark Office. Otherwise, such a licence agreement will be void as to its IPR terms. However, the interpretation of this section has been made that licences are allowed to be made for unregistered trademarks and the licence of unregistered trademarks shall be binding on the parties without the need for registration since section 68 only requires a licence to be registered against registered trademarks.

Although there are no specific laws that regulate licensing of unregistered IPRs, it is arguable that other IPRs that are not registered can also be licensed since Thailand emphasises the freedom to contract. However, once pending applications for patents and trademarks are granted, recordal of any licence to use must be effected with the Department of Intellectual Property.

Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

Under the Business Security Act BE 2558 (2015), intellectual property is included as a type of property that can be used as a business security. Notably, to do so in Thailand, the law requires that the receiver of the security must be a financial institution or any other entity that is specifically prescribed in the subsequent Ministerial Regulations to the Business Security Act. The law also requires that a business security agreement shall be executed in writing and filed with the Registrar at the Business Security Registration Office in the Department of Business Development. Failure to do so will result in the agreement being deemed void.

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?

First, it is important to note that the rights of the licensor and licensee to take action against infringers depend on the extent of the terms and conditions outlined in the licence agreement. In the case where such rights are not specifically mentioned in the licence agreement, several laws, such as the Trademark Act, the Patent Act, the Copyrights Act, the Civil and Commercial Code, or the Thai Criminal Code, may lay down the rules and provide guidance as to which contracting party is eligible to take action against infringers.

It is clear from the Trademark Act, the Patent Act, the Trade Secret Act and the Copyright Act that the licensor (or owner) will at all times possess the right of enforcement and will be able to take action against infringers. Also, the licensor may pursue certain legal remedies, such as an injunction or damages.

According to the aforementioned laws, a foreign owner or licensor of IPRs can initiate proceedings against a third party for infringement in Thai jurisdiction without joining the licensee as a party to the proceedings.

On the other hand, the laws are silent on whether an intellectual property licensee may initiate proceedings against an infringer of the licensed intellectual property in Thailand without the consent of the owner or licensor. Given the lack of clear guidelines, many believe that an exclusive licensee should have the same rights as the owner or licensor; therefore, it should be possible for an exclusive licensee to bring an action against infringement without the consent of the owner or licensor.

In any case, according to the Civil and Commercial Code, any action directed against intellectual property infringement by a third party should be joined by the owner or licensor to ensure that the action is properly initiated and valid. Also, since damages are generally awarded against actual demonstrable and quantifiable damages, licensees are usually joined in complaints against infringers because they would stand to most likely have incurred such actual damages.

Regarding the Thai Criminal Code, the licensee most likely has the right to file a complaint with the police and may attach a copy of the recorded licence agreement as evidence of standing. But safe practice dictates that the owner or licensor should join any complaint filed by the licensee in a criminal action.

Finally, since Thailand is a ‘freedom of contract’ jurisdiction, the contracting parties can adopt any terms or conditions they deem appropriate and agreeable, as long as the terms and conditions are fair and just. Therefore, the licensee could be contractually prohibited from instituting proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor.

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?

If not otherwise provided in the licence agreement, the licensee may not transfer the licence to third persons nor sub-license others to use the trademark. In other words, a trademark or service mark licensee may sub-license use of the mark to a third party, but 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?

Co-owners of intellectual property must jointly act when they want to assign or license it to a third party. The Thai intellectual property offices will require the co-owners to mutually sign the assignment or licence agreements for it to be acceptable for recordation or registration. The co-owners are not able to change this position in a contract. If one of the co-owners is to act on its own, the other co-owner must give consent and grant powers through a power of attorney for the former to act on their behalf.

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?

Thailand is a ‘first to file’ jurisdiction. The license of patents can only be registered for registered patents. The license of the use of an invention can be made, but it would not be considered a license of a patent application. Such a licence agreement shall not be enforceable based on the Patent Act, but it could still be enforceable based on the Civil Commercial Code.

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

Patents will not be granted for the following:

• microorganisms, animals or plants that naturally exist and their components or extracts;
• scientific and mathematical rules and theories including business methods;
• computer programs including software;
• methods for diagnosing, treating or curing diseases; or
• inventions that are contrary to public policy or morality, public health or welfare.

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?

Trade secrets and other confidential information are governed by the Trade Secrets Act BE 2545 (2002). Trade secret protection arises spontaneously on the creation of the trade secret. The protection for a trade secret can be lost if unauthorised public disclosure takes place anywhere in the world.

Trade secrets are defined by the legislation as trade information ‘not yet publicly known or not yet accessible by persons who are normally connected with the information and that the commercial values of which derive from its secrecy and that the controller of the trade secrets has taken appropriate measures to maintain its secrecy’.

Trade information is defined to include ‘any medium that conveys the meaning of a statement, facts, or other information irrespective of its method and forms. It shall also include formulae, patterns, compilations or assembled works, programs, methods, techniques, or processes’.

Trade secret laws in Thailand are designed to offer protection to the owner of confidential information from unauthorised use of secret information that has been disclosed in restricted circumstances or in cases where the information was obtained ‘contrary to honest trade practices’.

In several circumstances, the disclosure of a trade secret will not infringe the rights of the trade secret owner. For instance, the trade secret may have been discovered independently by a third party through independent invention or expertise, or through reverse engineering. Also, where a state agency is in possession of a trade secret, it may disclose or use that trade secret where it is necessary for the protection of public health or safety or when it is necessary for the benefit of other public interests with no commercial purpose. Notably, in 2015, the Trade Secrets Act was amended to reduce the penalties for unauthorised disclosure by government officials.

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?

As the essential value of trade secrets derives from their secrecy, which confers a competitive advantage over competitors, the licensing of third parties to use trade secrets is not as common as other forms of intellectual property. Nevertheless, the licensing of trade secrets often goes hand in hand with licences of other types of intellectual property – particularly in technology transfer or collaborative research and development agreements. In such agreements, proprietary know-how or show-how can be licensed to third parties in conjunction with licences of patented technology. Licences of trade secrets also are common in franchise-type relationships, original equipment manufacturer manufacturing and other outsourcing-type relationships. It is common to find licensors of patented technology seeking to restrict the use of trade secrets that may often be imparted with the licence of the patent.

The ability to grant licences to use or to disclose trade secrets is expressly recognised in the Trade Secrets Act. A trade secret owner may ‘license someone else to disclose, deprive of, or use the trade secrets’. Moreover, when licensing trade secrets, the owner is entitled to stipulate such terms and conditions for the maintenance of the secrecy of the information as he or she deems fit. There is no restriction in the legislation to this effect. Transfers and other forms of assignment of a trade secret also are provided for in the legislation. If no period of assignment term is specified in the contract, the term is presumed to be for 10 years.

Licences of trade secrets do not need to be in writing, and there is no recordal requirement. Nevertheless, in practice, most dispositions involving the grant of rights of use to a trade secret are in writing.

What constitutes copyright in your jurisdiction and how can it be protected?

In Thailand, copyright subsists in every original work of literature, drama, art, music, audiovisual materials, sound recordings, cinematographic materials, sound and video broadcasting, computer programs, disseminated sound or pictures, or other works in the fields of literature, science and the arts.

An author of a work is the owner of the copyright subsisting in the work. When a work is created while acting in the capacity of employee under hire of service, the employee is entitled to copyright unless it is otherwise agreed in writing, but the employer is entitled to cause publication of that work in accordance with the purpose of the hire of service. However, when a work is created by a contractor for commission, the employer is entitled to copyright unless it is otherwise agreed by the parties.

Copyright is protected automatically without any registration – although a voluntary recordal procedure is available and thus provides prima facie evidence of subsistence and ownership. The copyright owner possesses the exclusive right to take any action concerning that work in which the copyright subsists, including reproduction, adaptation or dissemination of the work, to the public.

Copyright licence agreements are governed by the provisions of the Copyright Act, the Ministerial Regulations and the general laws of contract under the Civil and Commercial Code. A licence does not give the licensee a proprietary right in the work but only permission to do the acts without subjecting him or herself to infringement liability.

Law stated date

Give the date on which the information above is accurate.

31 December 2020