For many modern-day businesses, developing a strong intellectual property portfolio (whether copyright, patent, trademark or trade secret) is regarded as a major objective. The attractiveness of holding strong IP assets is not just the competitive advantage it can confer (in the technological sense) over competitors, but a properly managed IP portfolio can also be a source of revenue for a business. The case of IBM illustrates the point. For many readers, IBM is synonymous with the production of computers, yet the majority of IBM's revenue comes from royalties from third parties who have paid for rights (licenses) to use IBM's proprietary technology. Today, IBM concentrates on developing and licensing new technology to business partners. Each year, IBM generates revenue in excess of US$1 billion.
Licensing IP, as in the IBM case, is one of the core means by which IP assets can create value for a company. Historically, the areas of registration and enforcement have been to the fore in Thai IP enforcement. However, as more and more enterprises embrace IP, and as more and more foreign IP owners are transferring technology to Thailand (often as part of manufacturing outsourcing), the importance of licensing is growing.
Licensing is possible for all types of IP assets in Thailand. However, there are quite a lot of peculiarities and traps into which an unwary business may fall. This article provides a general overview of Thai licensing law as it applies to trademarks, patents and copyright.
Trademark Licensing
Under the Thai Trademark Act B.E. 2534 (1991), before a license of a registered mark will be enforceable, it must be in writing and it must be registered with the Trademark Office. If the license agreement further permits the licensee to grant sub-licenses, any subsequent sublicense agreement must also be in writing and registered with the Trademark Office. There is a clear benefit from registration in that use by a licensee or sub-licensee will be deemed as use of the mark by the licensor (the owner of the mark), which can be raised as a defense in the event of a cancellation action for non-use. Nevertheless, the registration requirement, by international standards, is a very onerous requirement. Failure to register may mean the license is void, in some cases.
Upon application to register a license, the Registrar will examine the terms to ensure they comply with the law. The license agreement must contain the following particulars:
- the terms and conditions of the agreement between the owner of the registered mark and the authorized licensee, under which conditions the former must actually be able to control the quality of goods manufactured or services rendered by the latter.
- the goods or services for which the licensed mark is used.
- whether the authorized licensee has the exclusive right to use the mark or whether the owner of the mark can license other parties to use the mark.
- other particulars, e.g., specific term or duration of agreement.
Trademark or service mark license agreements are governed by the provisions of the Trademark Act 1991 (Sections 68-79), the Ministerial Regulations, and the general laws of contract under the Civil and Commercial Code. Generally, the contracting parties can adopt any terms and conditions they deem to be appropriate and agreeable, as long as these terms and conditions are not contrary to law, public order, morals, or government policy.
Patent Licensing
Patent license agreements are governed by the provisions of the Patent Act B.E. 2522 (A.D. 1979), as amended in 1992 and again in 1999, and Ministerial Regulation No. 25 B.E. 2542 (A.D. 1999) issued under the Patent Act, the Ministerial Regulations, and the general laws of contract under the Civil and Commercial Code.
As in the case of trademarks, patent licenses must be in writing and submitted to the Patent Office, DIP. Under Section 41 of the Patent Act (No. 3) B.E. 2542 (A.D. 1999), a license agreement of a patent must be in writing in compliance with the requirements, procedures, and conditions prescribed by the Ministerial Regulations, and it must be registered with the Patent Office.
It is not permissible to restrict the license to Thailand. According to clause 3(7) of Ministerial Regulation No. 25 B.E. 2542 (A.D. 1999), it may be considered unfair limitation of competition if a licensee is bound not to export the products for sale or for distribution abroad or is bound to obtain permission to export from the patentee/petty patentee before the intended export is made. However, the foregoing provision will not be applicable if the patentee has already held the patent in the country of intended export and the patentee’s exclusive sales agent/distributor for the products has been appointed in that country before the patent licensing agreement is made with the licensee.
The parties are free to determine the duration of the license 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 No. 25 B.E. 2542 (A.D. 1999) concerning unfair practices and unfair restraints on competition, as enforced by the Director-General under the Patent Act. A licensor may not require a licensee to pay a royalty for use of the patented invention after the patent term has expired.
Copyright Licensing
Copyright license agreements are governed by the provisions of the Copyright Act B.E. 2537 (1994), the Ministerial Regulations B.E. 2540 (1997), and the general laws of contract under the Civil and Commercial Code. Copyright subsists automatically on creation of an original qualifying work, and there are no registration requirements. In the case where the copyright owner wishes to assign the whole or part of his copyright for a limited period of time or for the entire term of the copyright protection, which can range from 25 to 50 years after the death of the author depending on the type of copyright in question, the assignment of the copyright must be made in writing and signed by the assignor and the assignee. While an assignment is a transfer of ownership, a license does not give the licensee a proprietary right in the work but only permission to do the acts without subjecting himself to infringement liability.
The parties are free to set the term of the license, although the maximum period for a copyright licensing agreement is the date of the expiration of the copyright, generally 50 years after the death of the author, or 50 years after the first publication if the work was not published during the author’s lifetime. The licensor has a duty not to unfairly limit competition according to articles 1 and 2 of the Ministerial Regulations B.E. 2540 (1997) issued under the Copyright Act, namely:
- A licensee may not be required to procure materials wholly or in part from such supplier as designated by the copyright owner.
- A licensee may not be required to sell or distribute more than half of the copied products to the patentee or their named nominee.
- A licensee may not be bound to limit the quantity of production, sales, or distribution concerning the copied products.
- There may be no condition or limitation of the licensee’s right to use any other copyrighted work owned by a third party.
Even though there is no system and requirement for registration of copyright and copyright license agreement in Thailand, the DIP allows copyright owner to record his work and relevant information including copyright licensing with the Copyright Office of the DIP. The copyright recordation is not a conclusive evidence to prove/show copyright ownership, but it can serve as a piece of evidence in case of copyright infringement action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.