IP in business transactions: Germany overview

A guide to intellectual property law in Germany. The IP in business transactions Q&A gives an overview of maintaining an IP portfolio, exploiting an IP portfolio through assignment and licensing, taking security over IPRs, IP and M&A transactions, and the impact of IP on key areas such as competition law, employees and tax.

To compare answers across multiple jurisdictions, visit the IP in business transactions Country Q&A tool.

This Q&A is part of the global guide to IP law. For a full list of jurisdictional Q&As visit www.practicallaw.com/ip-mjg.

Contents

Overview of main IPRs

1. What are the main IPRs in your jurisdiction? How are they protected?

Patents

Patents provide protection for technical inventions that:

  • Are new.

  • Involve an inventive activity.

  • Are susceptible of industrial application.

Registration and grant of the patent are required for protection. Patents are granted by either the:

  • German Patent and Trade Mark Office (Deutsches Patent und Markenamt) (DPMA) (www.dpma.de).

  • European Patent Office (EPO) (www.epo.org).

Patents provide protection for 20 years, starting on the day following the filing of the patent application. For medicinal products and plant protection products (for example, insecticides, herbicides, and so on), protection can be extended for a maximum of five years through supplementary protection certificates (SPCs).

Trade marks

Registered trade marks. Trade mark protection is available for any sign which is capable of distinguishing the goods and services of one undertaking from those of other undertakings. These signs may consist of words, letters, numbers, pictures, colours or sounds.

In general, trade mark protection can be acquired through registration. An application for registration must be filed with the:

Protection of registered trade marks lasts ten years from the filing date and can be renewed indefinitely for further periods of ten years.

Unregistered trade marks. Trade mark rights may also be established either through:

  • Use of a sign in the course of trade if the sign has acquired a secondary meaning as a trade mark with the relevant public (Verkehrsgeltung).

  • Notoriety within the meaning of Article 6bis of the Paris Convention for the Protection of Industrial Property 1883 (Paris Convention).

Copyright

Copyright protects literary, scientific and artistic works if they constitute personal intellectual creations.

There is no registration system in Germany for copyright. Protection arises automatically on creation of the work.

Generally, copyright protection lasts for 70 years after the end of the year of the author's death. However, different terms apply to neighbouring rights (that is, the rights of performers, producers, broadcasters and so on).

Design rights

Registered designs. Registered design rights protect the outer appearance of a product or a part of a product that results from the lines, contours, colours, shape, texture, materials of the product and its ornamentation.

To benefit from protection, a design must both:

  • Be new.

  • Have individual character.

An application for registration must be filed with the:

Design rights can be protected for a period of up to 25 years from the date of filing.

Unregistered designs. Designs may also be protected as unregistered Community designs.

Protection lasts for three years from the date the design was first made available to the public within the EU.

Confidential information

Protection of trade and company secrets is provided through unfair competition law. Prohibited acts include, among others:

  • Wilful breach of secrecy made by employees during the term of their employment.

  • Espionage of trade secrets (that is, the unlawful acquisition of trade secrets through, for example, technical means).

  • Exploitation of a secret obtained through espionage.

Utility models

Utility models provide protection for technical inventions that:

  • Are new.

  • Involve an inventive step (as opposed to an inventive activity that is required for patent protection).

  • Are susceptible of industrial application (except for manufacturing or processing methods).

Registration is required for protection. Utility models are granted by the DPMA (www.dpma.de). Unlike for patents, novelty and inventive step are not examined before registration.

Protections last for ten years from the date of filing.

Business signs

In addition to trade mark registration, it is possible to obtain protection for business signs (that is, company names and logos). Protection requires continuous use in trade. No registration is required.

For further information about the main IPRs, see Patents, trade marks, copyright and designs in Germany: overview ( www.practicallaw.com/6-501-7605) .

 

Maintaining IPRs

Search and information facilities

2. What facilities are available to conduct IP searches and obtain IP information on registered IP rights?

Patents/utility models

Searches can be conducted through:

These search facilities are very basic. For clearance purposes, it is therefore recommended to have comprehensive searches conducted by a patent attorney or lawyer.

Trade marks

Searches can be conducted through:

These searches do not replace professional searches and results are limited to identical or highly similar signs. For full clearance purposes, it is therefore recommended to instruct a trade mark search specialist.

Design rights

Searches can be conducted through:

It is not recommended to only rely on the results of these searches. Design specialists should be instructed to conduct professional design searches.

Company names

Searches can be conducted through the shared register of companies portal for the German federal states (Gemeinsames Registerportal der Länder). Searches can be conducted by company name or company number (www.handelsregister.de/rp_web/welcome.do).

 

Maintenance of main IPRs

3. What steps must a business take to maintain the registration and status of its main IPRs?

Patents

To maintain a patent registration, renewal fees must be paid each year after the second anniversary of the filing date. A patent can be renewed for up to 20 years. The renewal fees range from EUR70 in the third year and increase each year up to EUR1,940 for the 20th year.

Trade marks

To maintain a German trade mark registration, renewal fees must be paid before the expiration of the ten-year term plus a grace period of six months. The renewal fee is EUR750 for up to three classes of goods and services, and EUR260 for each additional class.

In addition, within five years of registration, a trade mark must be put to genuine use in relation to the goods and services for which it is registered. The trade mark may otherwise be cancelled for non-use, regardless of whether renewal fees have been paid.

To maintain protection of an unregistered trade mark, it is necessary to use the sign extensively in the course of business in order to preserve the acquired secondary meaning or notoriety (see Question 1, Trade marks: registered trade marks).

Design rights

To maintain a German design registration, renewal fees must be paid every five years from the filing date. The renewal fees range from EUR90 for the sixth to tenth year to EUR180 for the 21st to 25th year.

Confidential information

To maintain the status of confidential information, reasonable steps must be taken to keep the information confidential.

Utility models

To maintain a utility model registration, renewal fees must be paid after the third, sixth and eighth anniversary of the filing date, as follows:

  • EUR210 for the fourth to sixth year.

  • EUR350 for the seventh and eighth year.

  • EUR530 for the ninth and tenth year.

 

Monitoring infringement

4. What steps can a business take to avoid committing an infringement of another party's IPRs and to monitor whether a competitor is infringing its IPRs?

Avoiding infringements

To avoid committing an infringement of third parties' IPRs, it is recommended to:

  • Set up an IP strategy and policy.

  • Train employees on IP issues.

  • Conduct professional searches for prior rights (see Question 2).

  • Monitor the market.

Monitoring infringements

To monitor infringements of IPRs by third parties, the following are recommended:

  • Periodic review of competitors' products and advertising.

  • Periodic conduct of searches in databases (see Question 2).

  • Use of professional monitoring services.

 

Exploiting IPRs

5. What are the main steps in an IP audit in your jurisdiction to determine the content of an IP portfolio?

The main steps in an IP audit are as follows:

  • Identification and classification of registered and unregistered IPRs, including applications, which are owned, licensed and/or used by the company.

  • Examination of the IPRs by gathering and reviewing the documents relating to those IPRs and conducting searches on the registries (see Question 2). This includes:

    • verifying ownership of the IPRs;

    • verifying the chain of title;

    • verifying the status of the IPRs, including registration number, application and registration date, territory of protection, expiry/renewal dates, payments of periodical fees (for maintenance and renewal);

    • assessing the validity of the IPRs;

    • identifying any encumbrances;

    • reviewing assignments, licences, co-existing agreements and other agreements relating to the IPRs (for example, research and development agreements, collaboration agreements, non-disclosure agreements);

    • verifying whether there are any proceedings and challenges relating to the IPRs (for example, infringement, opposition, nullity, compulsory licence, rectification, revocation, cancellation or competition law proceedings);

    • verifying whether and to what extent the IPRs have been used, where this is important for the validity of the IPRs (for example, for trade marks); and

    • verifying whether inventions of employees have been properly handled (see Question 22).

 

Assignment

Scope of assignment

6. On what basis can main IPRs be assigned?

Patents

Granted patents, patent applications and inventions can be freely assigned to any third party.

However, the right to the invention is a personal right (moral right) and is not transferable. An inventor who assigns his right to the invention therefore remains the inventor. The assignment will only transfer the proprietary rights (monetary rights) in the invention.

A German patent can only be assigned for the whole Federal Republic of Germany. In the case of a European Patent, the national patents can be assigned individually. However, single rights can be granted through licensing, which can be restricted territorially or otherwise.

Trade marks

Registered trade marks, applications for trade mark registration and the rights conferred by the use or notoriety of a trade mark can be assigned in whole or in part (that is, in respect of some or all of the goods and services for which the trade mark enjoys protection). Any goodwill transfers automatically.

Where a trade mark forms part of a business being transferred, the trade mark is deemed to be transferred with that business, unless otherwise agreed between the parties. It is not necessary to assign any business assets for the validity of the transfer.

Copyright

Copyright cannot be assigned, but only licensed (see Question 9, Copyright).

Design rights

Both registered and unregistered designs, and design applications, can be freely assigned.

A German design can only be assigned for the whole Federal Republic of Germany or the whole of the EU in the case of a European Design (registered or unregistered). However, single rights can be granted through licensing, which can be restricted territorially or otherwise.

Utility models

The same principles apply as for patents (see above, Patents).

Company names

Company names cannot generally be assigned without transferring the business for which the names are used.

 

Formalities for assignment

7. What formalities are required to assign each of the main IPRs?

The assignment of German IPRs does not require a written form (except for certain copyright licences), and can be based on an implied agreement. However, assignments should be recorded in writing for clarity and evidentiary purposes.

Registration is not required for the validity of an assignment. However, the assignment should be registered as registration has a "legitimising effect".

The assignments of the following IPRs must be in writing and signed by both parties to be valid:

  • European patent applications.

  • Community trade marks.

  • Community designs.

 

Main terms for assignments

8. What main terms should be included in an assignment of IPRs?

The following terms should always be included in an assignment of IPRs:

  • Details of the assignor and assignee.

  • Precise definition of the IPRs being assigned.

  • Scope of the assignment (in whole or in part).

  • Assignment clause, clearly indicating that the IPRs are being assigned by the assignor and the assignment is accepted by the assignee.

  • Warranties and/or indemnities regarding the assigned IPRs (see Question 15).

  • Price, due date, method of payment and costs, such as fees for the registration of the assignment. A purchase price is not necessary as assignments do not require consideration under German law (unlike in common law jurisdictions). However, if the assignment also relates to foreign IPRs and must be registered with foreign authorities, it may be advisable to include some consideration.

  • Specific obligations of the assignor to:

    • hand over all relevant documents relating to the IPR; and

    • assist in recording the assignment in the register.

  • Effective date.

  • Governing law and jurisdiction provisions.

  • Severability.

 

Licensing

Scope of licensing

9. On what basis can the main IPRs be licensed?

Patents

Patents can be licensed in whole or in part, exclusively or non-exclusively. Licences can include restrictions regarding the field of use, period of use, territory and so on, provided that these do not breach competition law (see Questions 18 and 19).

In principle, the rights acquired under a licence can be sub-licensed or assigned to third parties.

Trade marks

The same principles apply as for patents (see above, Patents).

Trade mark licences are usually limited to certain goods and services or to a specific territory, including within Germany.

Trade marks can be licensed with or without goodwill.

Copyright

Copyright licences can be exclusive or non-exclusive. They can be limited in respect of place, time or content.

Design rights

Designs can be licensed exclusively or non-exclusively, and may be limited to certain content, territory and by duration.

Confidential information

Know-how can be freely licensed, exclusively or non-exclusively, with restrictions in terms of territory, duration or content. In many cases, know-how licences are granted together with patent licences. Special care should be taken to maintain confidentiality and protection.

Utility models

The same principles apply as for patents (see above, Patents).

Company names

Company names cannot be licensed under German law.

 

Formalities for licensing

10. What are the formalities to license each of the main IPRs?

Patents

A patent licence can be concluded orally or tacitly, as no written form is required. However, licences should be recorded in writing for clarity and evidentiary purposes.

Registration is not required for a licence to be effective against third parties.

Trade marks

There are no formal requirements for trade mark licences under either German law or Community trade mark law. However, the registration of licences of Community trade marks is necessary for a licence to be effective against third parties.

Copyright

There are generally no formal requirements for copyright licences. However, licences covering future works that are not specified, or are only referred to by type, must be in writing.

The scope of copyright licences is usually interpreted narrowly. It is therefore recommended to explicitly mention all forms of use and exploitation for which the licence is granted.

Design rights

There are no formal requirements for licences of design rights either under German law or Community design law. However, registration of licences of Community designs is required for a licence to be effective against third parties.

Confidential information

There are no formal requirements for know-how licences. However, it is recommended to enter into a written agreement specifying the obligations of the party receiving the information, not only for clarity and evidentiary purposes, but also to maintain the confidentiality of the information.

Utility models

The same principles apply as for patents (see above, Patents).

 

Main terms for licences

11. What main terms should be included in an IP licence?

The following terms should always be included in an IP licence:

  • Details of the licensor and licensee.

  • Detailed definition of the IPRs being licensed.

  • Scope of the licence, in terms of:

    • subject matter;

    • territory;

    • term;

    • exclusivity or non-exclusivity;

    • right to grant sub-licences; and

    • right to transfer the licence.

  • Warranties and indemnities regarding the licensed IPRs (see Question 15).

  • Right to terminate the licence and/or automatic termination on the occurrence of certain events.

  • Royalties, including taxes, method of payment and due date.

  • Enforcement of the licensed IPRs in the case of infringements by third parties.

  • Provisions on how to deal with third parties' actions that prejudice the integrity of the licensed IPRs (for example, co-operation in defending a nullity action against a patent or the obligation of the right holder/licensor to defend such action).

  • Provisions on how to deal with third parties' actions preventing the use of the licensed IPRs.

  • Maintenance of the IPRs.

  • Change of control clause.

  • Effective date.

  • Governing law and jurisdiction provisions.

  • Severability.

 

Taking security

12. Is security commonly taken over IPRs?

Security can be taken over all types of IPRs. IPRs usually form an important part of the company's assets. Financial institutions that are lending money to companies therefore try to obtain securities not only over individual, selected IPRs, but over whole IP portfolios.

However, securities over IPRs only play a minor role, in particular as it is difficult to value IPRs. Security over registered IPRs is generally preferred. In any case, ownership and the validity of the right should be verified before taking security. In addition, it is recommended to conduct searches for any earlier conflicting rights.

Additionally, pledges must be enforced through a public auction procedure, which is quite a costly procedure and has the disadvantage that the full value of the asset may not be realised.

 
13. What are the main security interests taken over IPRs?

The two main security interests that are commonly taken over IPRs are a security assignment and a pledge.

A pledge is an accessory security interest that is dependent on the secured claim, whereas a security assignment is a non-accessory security instrument that can exist independently from the secured claim.

Both forms of security are commonly used in Germany. However, security assignments are more common as their enforcement is easier (see Question 12).

Patents

A security assignment and a pledge over a patent can be registered with the German Patent and Trade Mark Office (DPMA). However, registration is not required for the validity of the security interest.

Trade marks

There are no formal requirements for the creation of a pledge or security assignment over national trade marks. For Community trade marks, it is advisable to register the security assignment or pledge with the Office for Harmonization in the Internal Market (OHIM) as this is a requirement for the security to have effect against third parties. Registration is therefore required to prevent a bona fide acquisition by a third party without security.

Copyright

Security cannot be taken over copyrights as these are not transferable. However, the rights of use can be assigned or pledged.

Design rights

There are no formal requirements for pledges or security assignments regarding national design rights. For Community design rights, the same principles apply as for Community trade marks (see above, Trade marks).

Utility models

The same principles apply as for patents (see above, Patents).

 

M&A

Due diligence

14. What IP-related due diligence is commonly carried out in both a share sale and an asset sale?

In both share and asset sales, the steps to be taken in an IP-related due diligence are the same as those taken in an IP audit (see Question 5). Special attention should be paid to the following in existing agreements:

  • Termination provisions, in particular change of control clauses (in share sales).

  • Non-assignment clauses (in asset sales).

Special steps must also be taken to ensure that every relevant IPR is precisely defined and transferred, especially in asset sales.

In addition, a merger or acquisition may lead to a situation where the market share of the parties exceeds the relevant thresholds of a block exemption, so that competition law issues must be considered (see Questions 18 and 19).

 

Warranties/indemnities

15. What IP-related warranties and/or indemnities are commonly given by the seller to the buyer in both a share sale and an asset sale?

In both a share and an asset sale, the seller should give the following warranties, among others:

  • Ownership of the IPRs. The seller should warrant that it owns all relevant IPRs. If a list of the IPRs is attached to the business sale agreement, the seller should warrant that it is accurate and complete.

  • Payment of fees. The buyer can expect the seller to warrant that all registration, renewal, maintenance and other fees relating to the IPRs have been paid.

  • Infringement, litigation, settlement agreements. It is common for the seller to warrant that, so far as it is aware, the business to be transferred does not infringe any third party IPRs, and that no third parties are currently infringing the IPRs. Any proceedings, whether pending or completed, claims or other disputes should be disclosed, including any settlement agreements. The seller should warrant that any corresponding list attached to the business sale agreement is accurate and complete.

  • Opposition, revocation and invalidity. It is common for the seller to warrant that, so far as it is aware, there are no opposition, revocation or invalidity proceedings pending in relation to the IPRs. If such proceedings are pending, the seller should warrant that the list of proceedings attached to the business sale agreement is accurate and complete.

  • Compliance with the Act on Employee Inventions (AEI). The buyer can expect the seller to warrant that it complied with the AEI (see Question 22).

  • Licences/encumbrances. Any in and out-licences, and any encumbrances should be disclosed. The seller should also warrant that any corresponding list attached to the business sale agreement is accurate and complete.

 

Transfer of IPRs

16. How are the main IPRs transferred in both a share sale and an asset sale?

Share sale

No separate transfer of the IPRs is required as ownership of the IPRs by the target remain unchanged. However, change of control clauses in existing agreements that require the consent of the counterparty must be considered.

If the legal nature of the target or the target's name change as a result of the share sale, the registers should be amended accordingly, although this is not a requirement for the validity of the transaction or the transfer of IPRs.

Asset sale

An asset sale affects the ownership of the IPRs. Each IPR must therefore be assigned individually in accordance with the applicable statutory laws of all countries concerned. The sale agreement should include provisions ensuring that the seller will take all necessary steps to perfect the transfer. The registers should also be amended accordingly (see above, Share sale).

 

Joint ventures

17. Is it common for companies to set up joint ventures in your jurisdiction to develop projects that heavily involve IPRs?

In Germany, joint ventures (JVs) are a common way for two entities to work together and share resources in order to realise projects that they would not be able to achieve on their own. Such projects almost always involve existing IPRs, or at least lead to the development of several IPRs.

There is no fixed form for a JV. However, in order to minimise the risk of potential conflicts, the parties should establish a framework with respect to IPRs that includes the following key aspects (among others):

  • Definition of "background IP" (that is, IPRs created by each partner before the formation of the JV, which is is necessary or useful in conducting the business of the JV, or required to commercially exploit the "foreground IP" (see below)), and the ownership, licensing and cross-licensing positions in respect of those IPRs.

  • Definition of "foreground IP" (that is, IPRs created by each partner in the course of the JV), and the ownership (joint or individual, according to the contribution of each partner), cross-licensing positions, exploitation rights and payment of fees (for example, registration, renewal and maintenance fees) in respect of those IPRs.

  • Liability in the case of infringement of third parties' IPRs.

  • Confidentiality and non-compete provisions.

  • Grounds for termination of the JV and consequences of such termination.

 

Competition law

Main provisions and common issues

18. What are the main provisions of your national competition law that can affect the exploitation of the main IPRs?

The most relevant provisions of national competition law are Articles 1, 19 and 20 of the Act against Restraints of Competition (ARC). However, the exploitation of IPRs must also comply with European competition law. The provisions of the ARC correspond to Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) and prohibit:

  • All agreements between undertakings, decisions by associations of undertakings and concerted practices that have as their object or effect the prevention, restriction or distortion of competition, subject to limited exceptions (Article 1, ARC).

  • The abuse of a dominant position. An abuse exists, for example, in the case of discriminatory behaviour, unjust hindrance or denial of access to a monopoly network (Article 19, ARC). This prohibition also applies to undertakings with relative or superior market power (that is, a market power that is below dominance) (Article 20, ARC). German law is in this respect stricter than European law.

National provisions apply jointly with the TFEU when the disputed practice substantially affects the trade between member states of the EU (which is almost always the case).

 
19. What are the most common national competition law issues that arise in the exploitation of the main IPRs?

There are many competition law issues that can arise in the exploitation of IPRs, in particular in agreements dealing with IPRs. Generally, clauses that violate the relevant provisions of competition law are ineffective or may render the entire agreement null and void. In addition, violations of competition law can have other consequences, including injunctive relief, compensations claims and severe fines and penalties imposed by the regulatory authorities.

The most common issues are the following:

  • Licensing agreements. Particular care should be taken with regard to any clauses regarding market-sharing, price fixing, barriers to entry and downstream market foreclosure.

  • Patent settlement agreements. Restrictions beyond the scope of the patent, namely regarding its geographic, temporal or material scope, could breach competition laws. The same applies if the patent owner is aware that the patent does not meet the patentability criteria (see Question 1, Patents).

  • Trade mark co-existence agreements. Clauses aimed at market sharing or any other restriction that goes beyond the scope of the trade mark could breach competition laws.

  • Refusal to license patents. Owners of standard-essential patents can be prevented from enforcing their patent rights in court if they did not offer a licence for that patent to the other party on fair, reasonable and non-discriminatory (FRAND) terms (anti-trust objection of compulsory licence) (Article 242, German Civil Code; Article 19, ARC and Article 102, TFEU).

 

Exclusions/exemptions

20. What exclusions or exemptions are available for national competition law issues involving the exploitation of the main IPRs?

Restrictive agreements that may generate objective economic benefits that outweigh the negative effects of the restriction of competition are exempt from the prohibition of Article 1 of the Act against Restraints of Competition (ARC) (Article 2, ARC). To benefit from an exemption, an agreement must:

  • Allow consumers a fair share of the resulting benefit.

  • Contribute to improving the production or distribution of goods or to promoting technical or economic progress.

  • Not impose on the undertakings concerned restrictions that are not indispensable to the attainment of these objectives, or afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

In addition, the EU block exemption regulations apply whether or not the practice in question affects the trade between EU member states. The main block exemptions are:

  • Regulation (EU) No 316/2014 on the application of Article 101(3) of the TFEU to categories of technology transfer agreements (Technology Transfer Block Exemption Regulation).

  • Regulation (EU) No 330/2010 on the application of Article 101(3) of the TFEU to categories of vertical agreements and concerted practices (Vertical Restraints Block Exemption).

  • Regulation (EU) No 1217/2010 on the application of Article 101(3) of the TFEU to categories of research and development agreements (Research and Development Block Exemption).

 

Advertising

21. To what extent do advertising laws impact on the use of third party trade marks?

Under German unfair competition law, third party trade marks can be used in comparative advertising, provided that the comparison both:

  • Relates to goods or services meeting the same needs or intended for the same purpose.

  • Is objectively based on material, relevant, verifiable and representative features of the goods or services.

However, comparative advertising is not allowed if:

  • It leads to a risk of confusion in the course of trade.

  • The competitor takes unfair advantage or impairs the reputation of the third party trade mark.

  • The competitor discredits or denigrates the third party trade mark.

  • The competitor presents goods or services as imitations or replicas bearing the third party trade mark.

 

Employees and consultants

22. Who owns each of the main IPRs created by an employee in the course of his employment? Is compensation payable to the employee? What main steps can an employer take to ensure it owns each of the main IPRs?

Inventions

Inventions made by employees during the term of their employment are subject to the Act on Employee Inventions (AEI). The AEI regulates the notification, transfer and subsequent compensation of employees' service inventions (that is, inventions made during the term of employment and developed either as part of the regular work of the employee or that are essentially based on the company's experience or work).

An employee must notify the employer in writing and without undue delay of any service invention. The notification must be complete and must disclose the invention to the employer. The employer must send a written confirmation of receipt to the employee without undue delay.

Following amendments to the AEI adopted in 2009, all the property rights relating to the invention automatically pass to the employer unless the employer expressly states that it does not claim the invention within a period of four months after notification. Property rights include the right of the employer to exploit and patent the invention, and to license or sell it.

The employer must pay a statutory compensation to the employee. The amount is calculated on the basis of complex guidelines and mainly depends on the value of the invention for the company.

Copyright

The AEI does not apply to copyright (see above, Inventions). There is no "work made for hire" doctrine in German copyright law, unlike in other jurisdictions (such as the US). The owner of the copyright is the author.

Due to the non-transferability of copyright, an employer can only obtain rights of use. However, those rights remain with the employee, even where the work was created in the execution of his duties or following the instructions given by his employer. The employee is only obliged to grant rights of use to his employer if this is required by the terms or the nature of the employment agreement. In such cases, there is no specific right to compensation for the employee. It is therefore advisable to include clear, unambiguous provisions in the employment agreements on how such works should be dealt with.

The position is different with regard to computer programs, as the employer is exclusively entitled to exploit such programs.

Design rights

The AEI does not apply to design rights (see above, Inventions). The employer owns all design rights developed by an employee in the execution of his duties or following the instructions given by the employer, and does not have to pay compensation, unless otherwise agreed with the employee.

 
23. Who owns each of the main IPRs created by an external consultant? What main steps can a business take to ensure it owns each of the main IPRs?

Ownership

Consultants own the IPRs they create, unless agreed otherwise.

Main steps

Contracts with external consultants can be interpreted in a way that certain essential IPRs are implicitly licensed to the business, depending on the purpose of the contract (for example, in the field of copyright law). To avoid uncertainty and ensure that the business actually owns the main IPRs, contracts with consultants should contain provisions for the assignment of the main rights resulting from the consultant's contractual work to the business. The rights should be defined as precisely as possible.

 

Tax

24. What are the main taxes payable by a licensor on the licensing of the main IPRs?

For a licence between a foreign licensor (whose residence or registered office is outside of Germany) and a German licensee (whose residence or registered office is in Germany) (inbound licence), the licensor can be found liable for tax in Germany (limited tax liability). Under the Income Tax Act (Einkommenssteuergesetz), a person's or a company's (Article 2, Corporation Tax Act) tax liability is limited if it is not a resident or does not have its office in Germany, but receives certain domestic income under section 49 of the Act (for example, royalties) (section 1(4), Income Tax Act).

In such a case, withholding tax is payable by the licensee at a rate of 15.825%. The licensee must deduct this tax for reasons of convenience, although it is in principle payable by the licensor. However, withholding tax is not payable if a double taxation treaty applies and the licensor either:

  • Obtained confirmation from the tax authorities that the requirements set out in the treaty are met.

  • Applied for reimbursement of the withholding tax.

For a licence between a German licensor and a foreign licensee (outbound licence), the general principles of income taxation apply to royalties received by the licensor. Royalties are part of the licensor's income. For corporate licensors, the aggregate rate of corporate and trade tax is about 30% of the company's net profits. For an individual licensor, the tax rate depends on the individual's personal tax rate. In addition, withholding tax may be payable by the licensee in the foreign country.

 
25. What are the main taxes payable by a seller on the disposal of the main IPRs?

Payments received from the disposal of IPRs are part of the seller's taxable income and must be taken into account when calculating a company's net profit (see Question 24). A foreign seller selling an IPR to a German buyer is liable to tax in his country. For an individual licensor, the tax rate depends on the individual's personal tax rate.

 

Cross-border issues

26. What international IP treaties is your jurisdiction party to?

Germany is party to the following international IP treaties (among others):

  • WIPO Paris Convention for the Protection of Industrial Property 1883 (Paris Convention).

  • WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).

  • Patent Cooperation Treaty 1970 (PCT).

  • Strasbourg Agreement Concerning the International Patent Classification 1971 (IPC).

  • Act Revising the European Patent Convention 2000 (Munich EPC Act).

  • WIPO Patent Law Treaty 2000.

  • WIPO Madrid Agreement Concerning the International Registration of Marks 1891 (Madrid Agreement).

  • WIPO Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks 1989 (Madrid Protocol).

  • WIPO Trademark Law Treaty 1994.

  • WIPO Hague Agreement Concerning the International Deposit of Industrial Designs 1925.

  • WIPO Berne Convention for the Protection of Literary and Artistic Works 1971 (Berne Convention).

  • UN Universal Copyright Convention 1952.

A detailed list of treaties can be found at www.wipo.int/wipolex/en/profile.jsp?code=DE.

 
27. Are foreign IPRs recognised in your jurisdiction?

The principle of territoriality applies to IPRs and foreign IPRs cannot generally be enforced in Germany. Therefore, foreign IPRs are only recognised in Germany to the extent set out in international IP treaties (see Question 26).

 

Reform

28. Are there any proposals for reform?

Some areas of IP law are harmonised by EU legislation, whereas others are not. For example, unfair competition, which is part of trade mark law in certain jurisdictions, has not been fully harmonised.

Some of the main reform proposals covering IPRs are outlined below.

Patents

The Agreement on the Unified Patent Court (UPC) has been signed (but not ratified) by all relevant European countries. This agreement creates the first Community patent with a unitary effect throughout the EU and the UPC. However, some matters are yet to be determined (for example, costs and languages).

Trade marks

The European Commission issued a proposal for reforming the trade mark system with the aim to make "trade mark registration systems all over the EU more accessible and efficient for businesses in terms of lower costs and complexity, increased speed, greater predictability and legal security" (MEO/13/291) (27 March 2013). This proposal has not been finalised to date.

The Commission proposal will affect the following acts:

  • Directive 2008/95/EC to approximate the laws of the member states relating to trade marks (Trade Marks Directive).

  • Regulation (EC) No 207/2009 on the Community trade mark (Community Trade Mark Regulation).

  • Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) (Fees Regulation).

 

Online resources

German Patent and Trade Mark Office (Deutsches Patent und Markenamt) (DPMA)

W www.dpma.de

Description. Official website of the German Patent and Trade Mark Office (DPMA).

Office for Harmonization in the Internal Market (OHIM)

W https://oami.europa.eu ( www.practicallaw.com/8-106-7401)

Description. Official website of the Office for Harmonization in the Internal Market (OHIM).

World Intellectual Property Organization (WIPO)

W www.wipo.int

Description. Official website of the World Intellectual Property Organization (WIPO).



Contributor profiles

Prof Dr Peter Ruess, Partner

ARNOLD RUESS

T +49 211 5424 4030
F +49 211 5424 4044
E ruess@arnold-ruess.com
W www.arnold-ruess.com

Professional qualifications. Germany, Attorney-at-Law; Bar-Certified Specialist Attorney for Intellectual Property Law

Areas of practice. Intellectual property law, in particular trade mark and unfair competition law.

Non-professional qualifications. LL.M.

Recent transactions

  • Advising a Fortune 500 food manufacturer on product launches, advertising campaigns and strategic IP issues.
  • Enforcing trade mark rights for a DAX 30 corporation.
  • Drafting licensing agreements for several leading trade mark owners (for example, a luxury fashion label and an internationally known automobile brand).
  • In-depth experience in co-ordinating IP issues in M&A transactions, recently in two deals in the telecommunications sector and one deal in the publishing sector.
  • Successful litigation regarding fundamental advertising issues for tobacco business client (reaching the Federal Supreme Court).
  • Participation in a German key case on internet provider liability.
  • Continued strategic IP advice for a global leading consumer goods group, a market leader for game consoles (among others).

Dr Anja Doepner-Thiele, Counsel

ARNOLD RUESS

T +49 211 5424 4060
F +49 211 5424 4044
E doepner@arnold-ruess.com
W www.arnold-ruess.com

Professional qualifications. Germany, Attorney-at-Law; Bar-Certified Specialist Attorney for Intellectual Property Law

Areas of practice. Intellectual property law, in particular trade mark, design and pharmaceutical advertising law.

Non- professional qualifications. LL.M.

Recent transactions

  • Continued advice and representation in trade mark and design patent matters of one of the world's leading companies in the field of consumer electronics, especially against illegal imitations.
  • Successful litigation regarding one of the core product names of a well-known German cosmetics manufacturer.
  • Representing of one of the world's largest financial institutions in key colour trade mark infringement suit.
  • Advising on the development of advertising and marketing strategies, and advice on the trade mark portfolio of one of Germany's largest confectionery manufacturers.
  • Advising on IP issues in M&A transactions in the telecommunications sector.

Hannes Obex, Associate

ARNOLD RUESS

T +49 211 5424 4061
F +49 211 5424 4044
E obex@arnold-ruess.com
W www.arnold-ruess.com

Professional qualifications. Germany, Attorney-at-Law

Areas of practice. Intellectual property law, in particular patent and trade mark law.

Non-professional qualifications. LL.M.

Recent transactions

  • Continuous advice and representation in trade mark and design patent matters of one of the world's leading companies in the field of consumer electronics, especially against counterfeit products.
  • Representing German and international clients in patent infringement proceedings.
  • Advising in internationally co-ordinated patent infringement proceedings.
  • Advising a large manufacturer of watches on design protection and design patent law matters.

Dr Marina Rinken, Associate

ARNOLD RUESS

T +49 211 5424 4060
F +49 211 5424 4044
E rinken@arnold-ruess.com
W www.arnold-ruess.com

Professional qualifications. Germany, Attorney-at-Law

Areas of practice. Intellectual property law, in particular patent and trade mark law.

Recent transactions

  • Representing national and international companies in patent infringement proceedings, for example, in the areas of mobile radio technology, pharmaceuticals, chemistry, sewage management, flooring and automobile.
  • Advising on the interface of patent law and competition law, in particular FRAND and standard essential patents.
  • Advising and representing a large international furniture company in unfair competition matters.
  • Advising and representing national and international companies on trade mark and design patent matters.

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