Thursday 19 July 2012

German sublicensees enjoy protection even after termination of main licence

BundesgerichtshofThe German Federal Court BGH issued two decisions today aimed at protecting investors in intellectual property licences. Both decisions concerned copyright issues in which the copyright owner licensed the copyright to a licensee, but later terminated the license. The licensee had in the meantime sub-licensed the rights to others. The question in both cases was whether the sub-licensees still had a right to use the intellectual property. The court decided yes - the investments made by the sub-licensees justified the continuation of the licence. The court made it clear that its decision also applied to other IP rights, such as patents, trade marks and design rights.

The first decision concerned a software licence. The owner of the copyright had given a company its exclusive rights to a software program. The licensee in turn sub-licensed a further company to use the software. The main licence was cancelled due to non-payment of licence fees. The copyright owner sued for copyright infringement due to continued use of the software. The court decided that the termination of the main licence did not lead to a resultant termination of the sub-licence agreement. The sub-licensee had a continuing right to use the software.

Paul DesmondThe second decision concerned the rights to the jazz piece “Take Five” from Paul Desmond. The copyright owner assigned the European rights to a music publishing house, which in turn licensed these rights for Germany and Austria to a sub-licensee. The original licence was terminated in 1986 and the court was asked to rule on whether the sub-licensee still had the rights to the music in Germany and Austria. The court agreed that the rights were still in existence, despite the termination of the main licence.

The court came to its decisions by reviewing German Intellectual Property Laws relating not only to copyright, but also to trade marks, design rights and patents. It concluded that there was a principle under German law according to which licences remained in existence, even if the underlying IP right was assigned to another owner. The sub-licensee would have invested on the basis of the existence of the licence. It could normally neither influence nor foresee the termination of the main licence. It might suffer great economic damage or even be threatened in existence if the continued existence was in doubt.

The owner of the copyright (in this case) would not be adversely affected since it could usually require its former licensee to assign the proceeds from the sub-licence to the copyright owner.

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