In the modern world, any company in its activities is faced with the issues of obtaining rights to software (hereinafter referred to as software), which it needs to perform certain business operations or automate business processes. The granting of such rights in the vast majority of cases is carried out on the basis of licensing (sublicense) agreements. It is common practice to conclude such contracts and transfer rights between companies located or registered in different states. In this regard, when a resident of Belarus concludes license agreements with foreign companies, it is necessary to comply with the mandatory requirements of the Belarusian legislation.
License agreement or exclusive rights assignment 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 full for the entire duration of such a right, then an agreement on the assignment of the exclusive right is concluded. It is common practice to conclude such contracts and transfer rights between companies located or registered in different states.
Subject of the license agreement
An essential condition that must be contained in any contract, including a license one, is its subject. However, the definition of the subject in the license agreement has its own specifics.
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 indicated in the contract as transferable will be considered non-transferable, unless proven otherwise.
In accordance with paragraph 1 of Art. 44 of the Law of the Republic of Belarus of 05/17/2011 "On Copyright and Related Rights" (hereinafter referred to as the Copyright Law), the license agreement must provide for specific ways of using the software.
Under the license agreement, the party with 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). With respect to software, such an exclusive right of the licensor consists in allowing the licensee under a license agreement to carry out:
- installing software on a computer or other device;
- software launch;
- work with software (use of functional capabilities embedded in a computer program);
- other actions in accordance with Article 16 of the Copyright Law (other property rights): reproduction, distribution of copies of software, import of copies of software into Belarus, processing (modernization) of software, etc.
The subject matter 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 fully identify the corresponding software in the license agreement.
Other material terms of the license agreement
In addition to the subject matter, the essential terms of the license agreement are the following:
- about the period of its validity;
- about the territory in which the use of the software is allowed (clause 5 of article 44 of the Copyright Law).
Risks of non-negotiation of material terms in 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 assumed to be compensated. An exception to this rule, for example, is open licenses, which are free of charge in accordance with paragraph 2 of Art. 45 of the Copyright Act, unless otherwise provided by their terms.
In a licensing agreement between commercial parties, it is imperative to agree on the remuneration for 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 has been established).
Remuneration can be determined in a license agreement as a percentage of income for using the software either in the form of 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 on whether the granted license is exclusive or non-exclusive (simple). In the absence of such a condition in the license agreement, the transferred license will be considered 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 sub-licenses).
Sublicense agreements
The granting by the licensee of the right to use the software to the sublicensee is limited by the powers that are granted to the licensee himself under the license agreement. Therefore, when concluding sublicense agreements, it is necessary to make sure that the licensee has received from the licensor the corresponding rights transferred under the sublicense agreement, as well as the licensee's very right to conclude sublicense agreements.
Written form of the license agreement
As a general rule, a licensing agreement must be concluded in writing (clause 7 of article 44 of the Copyright Law), with the exception of an accession 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 Legislation Requirements for a License Agreement
In Belarus, license agreements with foreign companies (non-residents) refer to foreign exchange (foreign trade) agreements subject to foreign exchange control.
By Decree of the President of the Republic of Belarus dated March 27, 2008 No. 178 "On the Procedure for Executing Foreign Trade Agreements", license agreements with non-residents are classified as foreign trade agreements that contain the following mandatory conditions:
1) The amount (approximate amount) of the monetary obligations of the parties under the contract.
If the license agreement provides for remuneration for using 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 duration of the license agreement.
2) The terms of settlements, which are understood to mean the obligation of one party to settle the settlement prior to execution or upon the fulfillment of obligations by the other party.
The settlement procedure to be reflected in the license agreement is related to the fact of fulfillment of obligations to transfer rights to software. Therefore, this fact will need to be documented, for example, by drawing up and signing by the parties of the Certificate of Acceptance and Transfer of Rights to Software.
Article 10 of the Law of the Republic of Belarus of 22.07.2003 "On Currency Regulation and Currency Control" provides for the obligation to indicate in currency contracts, which, in particular, include license contracts with non-residents, the timing of the fulfillment of obligations by non-residents:
- to pay for the rights to the software transferred to a non-resident;
- on the return by the non-resident of the prepayment made by the resident in the event of non-fulfillment or incomplete fulfillment by the non-resident of the obligations to transfer the rights to the software.
Repatriation of currency values
As a general rule, foreign exchange operations 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 non-cash form without restrictions.
However, a resident of Belarus is obliged to repatriate currency values, i.e. the obligation to ensure crediting to your accounts opened with banks in Belarus:
- for export - Belarusian rubles and (or) foreign currency payable for the rights to software granted to a non-resident;
- when importing - Belarusian rubles and (or) foreign currency in case of a refund in case of non-fulfillment or incomplete fulfillment by a non-resident of its obligations to transfer rights to software.
The repatriation period is determined on the basis of the deadline for the fulfillment of the above obligations by a non-resident established by the license agreement, with the addition to it of the period for making a payment and transfer of funds, which, in turn, is determined according to the settlement conditions contained in the agreement and should not exceed 30 calendar days.
The extension of the repatriation period, release from the obligation to repatriate and its termination are carried out in the cases and in the manner directly provided for in Art. 19 of the Law of the Republic of Belarus of 22.07.2003 "On Currency Regulation and Currency Control".
Registration of a license agreement on the web portal of the National Bank of Belarus
As stated 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 period of its validity is equivalent to 4,000 base units or more (approximately 38,000 euros), then such a license agreement 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 to the subject matter. Specialist advice should be sought about your specific circumstances.
