Trademark licensing was first acknowledged in the 1998 Trademark Law; neither the 1967 Trademark Law nor Law 879/1879 contained provisions on licensing.
The existing Trademark Law – as republished in 2010 – allows a rights holder (licensor) to authorise third parties (licensees) to use its trademark in a specific territory on an exclusive or non-exclusive basis, for all or part of the goods or services for which the trademark is registered.
Licensees are required by law to:
- use the licensed trademark for permitted goods and services, allowing licensees to indicate that they are the manufacturers or distributors of those products or services; and
- add the term ‘under licence’ to the mark affixed on the licensed goods or services.
According to the Trademark Law, a licensor may enforce its rights against a licensee that breaches a licensing agreement in respect of:
- its duration;
- the form of the trademark;
- the nature of the goods or services for which the licence has been granted;
- the territory in which the trademark may be used; or
- the quality of the goods or services for which the licence has been granted.
The above are the most likely causes of conflict between licensors and licensees, but the list is not exhaustive.
Unless otherwise provided in the licensing agreement, licensees cannot initiate infringement proceedings without the rights holder’s consent, except in the case of exclusive licensees, which must first notify the rights holder. If the rights holder fails to respond following notification within the time limit specified by the licensee, then the licensee can initiate proceedings. However, should a licensor initiate infringement proceedings against third parties, licensees may intervene in the proceedings should they wish to obtain damages incurred following an infringement.
Licensing agreements are recorded with the Romanian Patent and Trademark Office (RPTO) and can be enforced against third parties following publication in the Official Gazette. However, the law provides that failure to register a licence with the RPTO does not affect:
- the validity of the licence;
- the possibility to intervene and claim damages in infringement proceedings initiated against third parties by the licensor; or
- evidence of genuine use by the rights holder in cancellation for non-use proceedings or proceedings in which the rights holder is required to provide evidence regarding use of its trademarks.
The agreement should specifically define ‘active’ and ‘passive’ sales and not restrict internet sales
Registration of a trademark licence with the RPTO usually takes between three and six months to be published and is subject to an official fee of €100 for each trademark, irrespective of whether there is a licensing agreement for each trademark or one agreement with multiple trademarks.
There are no special filing requirements to register a trademark licence with the RPTO, except for an executed original of the licensing agreement and power of attorney granted to the trademark attorney. Neither document requires legalisation.
Practitioners are advised to file only a licence form with the RPTO – it is customary to conclude an appendix to the licensing agreement with a one-page document consisting the de minimis details of the parties and the trademark(s) licensed – in order to maintain the confidentiality of the terms and conditions of the agreement.
In addition to the standard clauses regarding the duration, trademark, royalties, goods and services for which the licence is granted and territory, the following questions should be considered when drafting and negotiating a licensing agreement:
- Is the licence exclusive or non-exclusive?
- Is the licence total or partial?
- Will the licensor still be able to compete in the licensed territory?
- Will the licensee be allowed to sub-license?
- Will the licensee be able to file for an identical trademark in the licensed territory?
- Will the licensor be liable for any trademark infringement proceedings against the licensee?
- Will the licensee be able to act against third parties for trademark infringements?
- Will the licensee be required to use the licensed trademark genuinely in the territory throughout the entire duration of the agreement?
- Will the licensor be responsible for renewing the trademark on time?
- What happens in the event of termination of the licensing agreement?
- What happens in case of the insolvency or bankruptcy of the licensor or licensee?
Competition laws and regulations
Trademark practitioners should give careful consideration when applying competition restrictions relating to the purchase, sale and resale of goods and services that could fall under the prohibitions set out in Article 5(1) of the Competition Law or Article 101(1) of the Treaty on the Functioning of the European Union.
Romanian competition law is harmonised with EU antitrust legislation and prohibits anti-competitive agreements and practices and the abuse of dominant market positions.
Vertical agreements containing restrictions of competition could be exempted from the above-mentioned prohibition by:
- block exemption (under the EU Block Exemption Regulation (330/2010) and EU guidelines on vertical restraints); or
- individual exemption (under Article 5(2) of the Competition Law and Article 101(3) of the Treaty on the Functioning of the European Union), subject to the fulfilment of the conditions set out in national and EU competition laws (national rules are similar to those provided for in EU competition legislation).
Special attention should be given to the following points when executing a licensing agreement:
- If restrictions are imposed on the licensee regarding reselling products in the licensed territory, this could be considered a hard-core restriction that relates to market partitioning by territory or customer group. Any combination of exclusive and selective distribution systems could lead to such clauses being qualified as hard-core restrictions.
- The agreement should specifically define ‘active’ and ‘passive’ sales and not restrict internet sales, even if this means allowing licensees to sell outside the licensed territory. In principle, according to the Competition Law, every distributor should be allowed to use the Internet to sell products. Generally, selling online is considered a form of passive sale and a reasonable way through which customers can reach a distributor. Under block exemption rules, the supplier may require that websites reselling its goods meet its quality standards, just as the supplier may require that traditional retailers, catalogue sales or advertising and promotion in general meet its quality standards. However, no exception provided in the Block Exemption Regulation or in the EU guidelines on vertical restraints allows licensors to prohibit licensees from selling online.
- Non-compete obligations fall outside the scope of Article 101(1) of the Treaty on the Functioning of the European Union where the obligation is required to maintain common identity and the rights holder’s reputation. The duration of the non-compete obligation is irrelevant under Article 101(1) of the Treaty on the Functioning of the European Union, provided that it does not exceed the duration of the agreement. If these conditions are not met, then the duration of the non-compete clause should not exceed five years (the maximum period of the non-compete clause also depends on the market share threshold; this is without prejudice to the parties’ right to expressly agree to renew such a clause).
- Post-term non-compete and non-solicitation obligations are normally not covered by the Block Exemption Regulation, unless and only where the following conditions are cumulatively met:
- The obligation relates to goods or services which compete with the licensed goods and services;
- The obligation is limited to the premises and territory from which the licensee has operated during the licensing agreement’s duration;
- The obligation is indispensable to protect know-how transferred by the licensor to the licensee; and
- The duration of the obligation is limited to one year after termination of the licensing agreement.
- Restrictions on active sales must relate to active sales in the licensed territory or to customers exclusively allocated to other distributors or reserved by the licensor for itself.
- Fixing other trading conditions constitutes a restriction of competition by object, which cannot benefit from a block exemption. The parties must prove that the conditions for individual exemption are met (under Article 101(3) of the Treaty on the Functioning of the European Union). In order to benefit from the Block Exemption Regulation, it is necessary to examine the licensing agreement and the parties’ market power and compare this with the market share threshold provided for in the regulation.
Dragos M Vilau
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.