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In the modern world, any company in its activities faces the problems of obtaining rights to software (hereinafter referred to as software), which it needs to perform certain business operations or automate business processes. In the vast majority of cases, these rights are granted on the basis of licensing agreements (sublicensing). It is common to enter into such contracts and transfer rights between companies located or registered in different states. In this regard, when a resident of Belarus enters into license agreements with foreign companies, it is necessary to comply with the mandatory requirements of Belarusian legislation.
License agreement or exclusive rights transfer agreement?
First of all, it should be noted that the license agreement formalizes the granting of exclusive rights to another person for a limited time. If the exclusive right is transferred in its entirety for the duration of such right, an agreement on the assignment of the exclusive right is then concluded. It is common to enter into such contracts and transfer rights between companies located or registered in different states.
Subject of the license agreement
A key term that must be in any contract, including a license agreement, is its subject matter. However, the definition of the subject in the license agreement has its own specificities.
According to paragraph 2 of Art. 984 of the Civil Code of the Republic of Belarus (hereinafter – the Civil Code), the license agreement must contain an indication of the specific rights granted under it. Rights that are not stated in the contract as transferable will be considered non-transferable unless proven otherwise.
Pursuant to paragraph 1 of Art. 44 of the Law of the Republic of Belarus of 05/17/2011 “On Copyright and Neighboring Rights” (hereinafter referred to as the Copyright Law), the license agreement must provide terms specific to the use of the software.
Under the license agreement, the party holding the exclusive right to use the intellectual property object (the licensor) grants the other party (the licensee) permission to use the corresponding intellectual property object. (clause 1 of article 985 of the Civil Code). In the case of software, such an exclusive right of the licensor consists in allowing the licensee, within the framework of a license agreement, to carry out:
- install software on a computer or other device;
- software launch;
- work with software (use of functional capabilities built into a computer program);
- other actions in accordance with Article 16 of the Copyright (Other Proprietary) Law: reproduction, distribution of copies of software, import of copies of software into Belarus, processing (upgrading) of software, etc.
The subject of the license agreement must also specify the software for which the rights are granted to the licensee. Therefore, it is equally important to correctly and completely identify the corresponding software in the license agreement.
Other important terms of the license agreement
Besides the subject, the essential terms of the license agreement are as follows:
- on the duration of its validity;
- in the territory in which the use of the software is authorized (clause 5 of article 44 of the copyright law).
Risks of non-negotiation of the material clauses of a license agreement
If the license agreement does not contain all the essential conditions required by law, such an agreement may be recognized as not concluded.
Remuneration under the license agreement
As a general rule, a license agreement is supposed to be remunerated. An exception to this rule, for example, are open licenses, which are free in accordance with paragraph 2 of Art. 45 of the Copyright Act, unless their terms provide otherwise.
In a license agreement between commercial parties, it is imperative to agree on the remuneration of the granted right to use the software in accordance with the requirements of clause 1 of Art. 985 GK, unless otherwise provided by law. Otherwise, the license agreement may be invalidated (the fact that such an agreement is null and void is established).
Remuneration can be determined in a license agreement in the form of a percentage of the income from the use of the software, either as a fixed amount or in another way (clause 4 of article 44 of the copyright law).
It is important to provide in the license agreement:
- a condition indicating whether the license granted is exclusive or non-exclusive (simple). In the absence of such a condition in the license contract, the transferred license will be considered as simple (non-exclusive) (clause 2 of article 985 of the Civil Code);
- whether or not the licensee has the right to transfer the right to use the software to other persons (the right to issue sublicenses).
The grant by the licensee of the right to use the software to the sub-licensee is limited by the powers conferred on the licensee itself under the terms of the license agreement. Therefore, when concluding sublicense agreements, it is necessary to ensure that the licensee has received from the licensor the corresponding rights transferred under the sublicense agreement, as well as the right of the licensee to enter into sub-license agreements.
Written form of the license agreement
As a general rule, a license agreement must be concluded in writing (clause 7 of Article 44 of the Copyright Act), with the exception of an adhesion agreement and open licenses.
At the same time, a foreign economic transaction, which also includes a license agreement between a resident of Belarus and a foreign company, must also be made in writing (clause 2 of article 1116 of the Civil Code).
Currency law requirements for a license agreement
In Belarus, license agreements with foreign (non-resident) companies refer to exchange agreements (foreign trade) subject to exchange control.
By Decree of the President of the Republic of Belarus dated March 27, 2008 No. 178 “On the procedure for the execution of foreign trade agreements”, license agreements with non-residents are classified as foreign trade agreements which contain the conditions following mandatory:
1) The amount (approximate amount) of the monetary obligations of the parties under the contract.
If the license agreement provides for remuneration for the use of the software not in the form of a lump sum payment (one-time payment), but in the form of royalties (periodic payments), then in such an agreement it will be necessary to ‘indicate the total (approximate) amount of royalties for the entire term of the license agreement.
2) The terms of the settlements, which are understood as the obligation of a party to settle the settlement before the execution or during the execution of the obligations by the other party.
The settlement procedure to be reflected in the license agreement is related to fulfilling the obligations to transfer the rights to the software. Therefore, this fact must be documented, for example, by the establishment and signature by the parties of the Certificate of Acceptance and Transfer of Rights to the Software.
Article 10 of the Law of the Republic of Belarus of 07.22.2003 “On Currency Regulation and Control” provides for the obligation to indicate in foreign exchange contracts, which include, in particular, licensing contracts with non- residents, the time of performance of the obligations of non-residents:
- pay the rights to software transferred to a non-resident;
- the return by the non-resident of the deposit paid by the resident in the event of non-performance or incomplete performance by the non-resident of the obligations to transfer the rights to the software.
Repatriation of monetary values
As a rule, exchange transactions both in Belarusian rubles and in foreign currency between a resident of Belarus – a legal entity and a non-resident – a foreign company are carried out in a form other than cash without restrictions.
However, a resident of Belarus has the obligation to repatriate the monetary values, that is to say the obligation to ensure the supply of your accounts opened with banks in Belarus:
- for export – Belarusian rubles and (or) foreign currency to pay for software rights granted to a non-resident;
- when importing – Belarusian rubles and (or) foreign currency in the event of a refund in the event of non-compliance or incomplete compliance by a non-resident with his obligations to transfer rights to software.
The repatriation period is determined on the basis of the term for the fulfillment of the above obligations by a non-resident established by the license agreement, to which is added the term for making a payment and transfer of funds, which, in turn, , is determined according to the terms of settlement contained in the agreement and must not exceed 30 calendar days.
The extension of the repatriation period, the release from the repatriation obligation and its termination take place in the cases and in the manner directly provided for in art. 19 of the Law of the Republic of Belarus of 07.22.2003 “On Currency Regulation and Control”.
Registration of a license agreement on the web portal of the National Bank of Belarus
As indicated above, the license agreement with a non-resident must provide for the total (approximate) amount of the licensor’s remuneration for the entire period of its validity. If such a total amount of monetary obligations under a license agreement with a non-resident for the entire duration of its validity is equivalent to 4,000 base units or more (approximately 38,000 euros), then such an agreement license must be registered on the web portal of the National Bank of Belarus. Accordingly, the registration of the license agreement is carried out by the resident of Belarus or, on his behalf, by the bank serving him.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.