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«Report Q194 in the name of the Norwegian Group by Harald IRGENS JENSEN and Amund BREDE SVENDSEN The Impact of Co-ownership of Intellectual Property ...»

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Report Q194

in the name of the Norwegian Group


The Impact of Co-ownership of Intellectual Property Rights

on their Exploitation

Discussion and Questions

I) Analysis of the current substantive law

1) The regulation of co-ownership may depend on the origin of co-ownership.

It may be considered that, in case the object of an intellectual right (esthetical, technical or

commercial) is jointly created by two or more persons, the rules applicable to such a situation may be different from those applicable in the situation when the co-ownership results from the division of the same right among different persons as the consequence, for example, of heritage or a division of a company.

Also, there may be the situations where the co-ownership is imposed in fact by one party on the other in case of some technical creation (for example in case of the improvement or modification of the previous creations which not always may result in the independent right).

Therefore, the groups are invited to indicate if, in their national laws, the rules related to the co-ownership of IP Rights make any distinction in the applicable rules to the co-ownership of an IP Right in case the origin of the co-ownership rights is not voluntary but results from other situations, including the division of a right in case of a heritage.

In this context the Groups may also indicate if there are any legal definitions of co-ownership of the IP Rights adopted in their countries and what these definitions are.

In Norwegian law, there are no definitions of co-ownership specifically directed at IP Rights.

The rules applying to co-ownership of IP Rights make generally no distinction between coownership resulting from a voluntary act or from other situations, such as heritage. There are two exceptions, both applying to copyright. Section 6 of the Copyright Act, which has some provisions on co-owner’s rights to exploit the work, literally only applies to co-ownership resulting from actual co-authorship. It is unclear to what extent this provision may be applied by analogy to other forms of co-ownership in copyright. Section 39k of the Copyright Act requires, in cases where the copyright has passed from the original creator to his legal successors by heritage, the unanimity of all co-owners the first time the work is to be made lawfully available to the public. If the issue is a subsequent making the work available, in another way or form than earlier, the requirement is a majority of the heirs/co-owners.

2) A large debate, during the Singapore ExCo, took place with regard to the notion of the exploitation of an IP right.

More specifically, the groups were highly divided on the issue of outsourcing or subcontracting the exploitation of an IP right.

This question, particularly important in case of patents, relates particularly to the problem of subcontracting when a co-owner of the patent who, in principle, and at least according to the position expressed by AIPPI in its 2007 Singapore Resolution, has the personal right to exploit his own part of the patent, specifically by manufacturing and selling the goods or processes covered by the patent, needs to subcontract partially or totally the manufacturing of the product covered by the patent.

No common position could be achieved by the Singapore ExCo in 2007 on the question if the right to exploit the patent should also cover the right to subcontract, specifically the manufacturing of all or part of the invention being the subject matter of the patent.

Therefore, the groups are invited to present the solutions of their national laws on this specific point.

The law is not clear on this issue. It is thought that, in the case of patents, a co-owner who is entitled under the law or under a co-ownership agreement to manufacture and sell the products protected by the patent, is probably also entitled to have the products manufactured, entirely or partly, for it.

3) The working guidelines established for the Singapore ExCo contained also the question related to the possibility of the co-owner of an IP right to licence this right to third parties.

No distinction was, however, made in this context between a non-exclusive and an exclusive licence.

No differentiation was also made on the number of licences which could be given by one co-owner in case the non-exclusive licence would be permitted by the national law.

And if AIPPI adopted a resolution on the conditions of granting the licence, it also appeared during the discussion at the ExCo that some different or more precise solutions could have been obtained if the Working Committee had made a distinction between the nature of the licence.

Therefore, in order to improve the work of the ExCo, the groups are invited to specify how the differences in the nature of licenses (non-exclusive or exclusive) influence the solution of their national laws in respect of the right to grant the licence by a co-owner of an IP Right.

Reference is made to the report prepared for the Singapore ExCo by the Norwegian group, in which the distinction between exclusive and non-exclusive licenses was raised: “For copyright and other rights regulated by section 6 of the Copyright Act, the consent of all co-owners is needed to make the protected subject matter available to the public for the first time, also when this is done by a licensee. As stated under question 2 above, authorisation from all other co-owners is also necessary for making the work available in another manner or in another form than previously. However, each co-owner may without the others’ consent grant the licensee a right to make the work or other protected subject matter available to the public anew in the same manner as previously. The profit of such a licence will probably be shared according to how much the parties have contributed to the making of the said subject matter.

In case this is difficult to establish, the parties are presumed to have an equal share. The parties can agree otherwise.

For other IP rights, legal scholars agree that the granting of an exclusive licence requires the consent of all co-owners. When it comes to non-exclusive licences, the position is more uncertain, and co-owners are strongly recommended to clarify the matter in an agreement.

Unless specific circumstances in a case favours another solution, we doubt that a co-owner is free to grant this regardless the opinions of the other co-owners, since also simple licenses may have substantial effects on the value of the IP right for all co-owners. An analogy may be drawn to the rule prohibiting licensees of IP rights from granting sublicenses without authorisation from the licensor. However, it may be inferred form the Act on Co-ownership that a majority (according to their share of the IP in question) of the co-owners may decide to grant simple licences, at least when the agreed duration of these is shorter than 10 years.”

4) One of the most difficult questions which appeared during the discussion at the Singapore ExCo was the possibility to transfer or assign a co-owned share of an IP right.

And the problem seemed so complicated that finally the Working Committee decided to withdraw its proposal for a resolution on this point.

In fact, the discussion showed that the solutions concerning the right to transfer or assign may vary since there is a huge variety of situations related to the transfers of the co-owned share.

Notably, one could imagine that the transfer is operated on the whole share of the co-owned IP right, but it also could be simply an assignment of a part of the co-owned share, creating therefore an additional co-owner of an IP right.

And such transfer of a part of a share of an IP Right could be used to overcome the limitation which could exist on the granting of licences by the co-owners.

The Groups are therefore invited to precise their position on the question of the transfer or assignment of a share of the co-owned IP Right, taking into the consideration the different situations which may occur (the transfer of the whole share of a co-owned IP Right or the transfer only of the part of the share of the co-owned IP Right).

According to the Act on Co-ownership, a co-owner of an IP right may assign his share or a part of it to third parties, unless he has agreed otherwise with the other co-owners. However, each of the other co-owners has an option to acquire the share for the price that the buyer agrees to pay. If the agreed price is clearly below the market price, the price shall be adjusted to an ‘ordinary’ level. Normally, the other co-owners’ right of purchase does not apply if the buyer is ‘closely related’ to the seller, for instance a spouse or child.

If more than one co-owner wish to purchase the share, it shall be divided between them according to the size of their previous shares.

For copyright and performers’ rights the situation may be different, due to the ‘moral’ aspect of these rights. If one of the original creators or performers wants to assign his share to a third party, it is assumed in legal doctrine that the other co-owners can only acquire this share if the assignor has granted the third party the right to transfer the share to others.

Since there is, at least in the case of patents, where the issue appears to be most relevant, the said right of preemption, it appears unlikely that selling a part of a share would be a viable strategy to get around the limitation on granting non-exclusive licenses.

5) The exercise of an IP right co-owned by two or more co-owners each of whom has in principle the right to exploit the co-owned right, may also raise difficulties from the point of view of competition rules.

The co-owned IP Rights may give the co-owners the dominant position on the market and their agreement on the co-owned IP Rights (when for example it prohibits the licensing) may also be seen as eliminating the competitors from the market.

The groups are therefore invited to explain if their national laws had to treat such situations and what were the solutions adopted in those cases.

In Norway there is no legislation expressly dealing with this issue, and no case law either.

It should be mentioned, however, that Norwegian competition law largely corresponds to EU competition law, and our rules on agreements on the joint exploitation of research results are basically the same as can be found in the EU (e.g. regulation 2659/2000 – the block exemption for agreements on research and development).

6) The groups are invited to investigate once more the question of the applicable law that could be used to govern the co-ownership of various rights coexisting in different countries.

This point was left for further study by the paragraph 9 of the resolution adopted in Singapore.

And more specifically the Groups are requested to indicate if their national laws accept that the co-ownership of an IP Right, even if there is no contractual agreement between the co-owners, may be ruled by the national law of the country which presents the closest connections with the IP Right.

If this is the case, what in the opinion of the Groups would then be the elements to take into the consideration to assess this connection?

The Groups of the EU Countries are in this context asked to indicate if they consider that Council Regulation of June 17, 2008 (No 593/2008), so called “Rome I” may be applicable to the Co-Ownership agreements.

Under Norwegian law, if there is no contractual agreement on the choice of law, it is the law of the country to which the disputed issue has the closest connection that is to be applied. The assessment is based on an overall approach. The main element to take into consideration is which country the characteristic performance under the contract has the closest connection to. A co-ownership, even if it is not governed by a contract established by the co-owners, is a type of contractual relationship. However, it may be unclear what the characteristic performance of a co-owner under a co-ownership agreement is.

An IP right will often be found to have the closest connections to the country where it is registered, provided it is a right that can or has to be registered. This may lead to situations in which several co-ownerships come into existence between the same parties and in respect of parallel rights, e.g. in the case of parallel patents or in the case of a European patent, one co-ownership for each designated country, each co-ownership being governed by a different national law. This is probably not a good solution.

Norway is not a member state of the EU, and “Rome I” is therefore not applicable, although the principles expressed in “Rome I” are, generally, the same as the non-statutory principles applied in Norwegian international private law.

7) Finally, the groups are also invited to present all other issues which appear to be relevant to the question and which were not discussed neither in these working guidelines, nor in the previous ones for the 2007 ExCo in Singapore.

Nothing to add at this time.

II) Proposal for the future harmonisation The groups are invited to present any recommendation that can be followed in the view of the further harmonisation of national laws in the context of co-ownership, specifically on the points raised by the working guidelines above in relation to the current state of their national laws.

First, it has to be recognised that IP rights are diverse, and that the same may be true of the solutions that can be applied to the different issues relating to co-ownership.

Secondly, to the extent that the regulation of co-ownership in IP rights in the national laws of some countries depends on the origin of the co-ownership, such distinctions should be eliminated, as a prerequisite for international harmonisation.

Thirdly, the question of the co-owners right to individually exploit the IP Right should be addressed, and this should be a right each co-owner can exercise without having to ask permission or consent of the others. Such right should extend to subcontracting from third parties for a co-owner’s own requirements of products or services to be used or sold by it.

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