IP in business transactions: Switzerland overview
A guide to intellectual property law in Switzerland. 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 multi-jurisdictional guide to IP law. For a full list of jurisdictional Q&As visit www.practicallaw.com/ip-mjg.
Overview of main IPRs
A patent is a registered proprietary right to an invention that is a new solution to a technological problem. Products and processes can be patented if the invention is:
Novel (that is, not already part of the prior art).
Non-obvious to a person skilled in the art.
Suitable for industrial application (commercially applicable, suitable for execution and reproducible).
Not legally excluded from protection.
A patent gives its owner protection from another person commercially using his invention without permission.
Swiss patent law is codified in the Federal Patent Act (PA) and the related ordinance. For an international patent application or a European patent application, the provisions of the Patent Cooperation Treaty 1970 (PCT), and the European Patent Convention 1973 (EPC) and related ordinances, are also applicable.
A trade mark is a registered proprietary right to a graphically reproducible sign capable of distinguishing a person’s or enterprise's goods or services.
The following marks can be registered:
Each of these marks can consist of:
At least two letters or numerals, words or any combination of these.
Three-dimensional shapes, if not dictated by technical reasons.
Single colours (if distinctive) or colour combinations.
Any combination of the above.
A trade mark owner can prevent others from using in the course of trade an identical or confusingly similar mark for goods or services that are identical or of the same kind.
The Federal Act on the Protection of Trade Marks and Indications of Origin (TMA) and the related ordinance apply.
Copyright protects intellectual creations with an individual character in the field of literature or art and software. Registration of copyright is neither necessary nor possible. In addition to the right to commercial exploitation, the author also has a number of moral rights, such as a right of integrity of the work and protection against the destruction of the work. Protection starts on the creation of the work.
The Federal Act on Copyright and Neighbouring Rights (CA) and its implementing ordinance also establish protection of the rights of performers and interpreters, producers of phonograms and videograms and broadcasters.
A design is a registered proprietary right to a two-dimensional logo or pattern or a three-dimensional shape of an object. It is characterised by the arrangement of lines, surfaces, contours, colours or the material used. To be legally valid, design rights must be registered. The requirements for protection are:
Not contradicting public order, morality or applicable law.
Its shape not being dictated by technical functionality.
The Federal Act on Industrial Designs (DA) and its implementing ordinance apply.
Confidential information is not an IP right. It has been defined by the Swiss Federal Supreme Court as a special kind of knowledge of facts that is an objective secret (neither obvious nor readily accessible). The owner must also have a legitimate interest in the secrecy and wish to keep the information confidential.
Confidential information is protected by, among other things:
The general rules of good faith.
Unfair Competition law (Articles 2, 4c, 5a, 5b, 5c, 6, Federal Act Against Unfair Competition (UCA)).
Employment law (Article 321a, Code of Obligations (CO)).
Criminal law (Articles 162 and 273, Penal Code (PC)).
Special legislation applying to specific industries and professions, for example banking law (Article 47, Federal Act on Banking Institutions).
Protection of confidential information by non-disclosure agreements or confidentiality clauses is highly recommended.
Swiss law also recognises as IPRs:
Plant variety rights. These are recognised under the Federal Act Regarding the Protection of Plant Cultures and the implementing ordinance.
Topographies. These are recognised under the Federal Act on the Protection of Topographies of Semi-Conductors.
Geographical indications. The TMA prohibits the misleading use of geographical indications, regardless of whether they are registered. Agricultural products are specifically protected under the Federal Act on Agriculture. Declarations of origin and geographical indications for agricultural products and processed agricultural products can be registered as an Appellation d'Origine Contrôlée (AOC) or Protected Geographical Indication (PGI) with the Federal Office of Agriculture. Wine appellations are protected under the Ordinance on Viticulture and the Importation of Wine.
For further information about the main IPRs, see Main IPRs: Switzerland.
There is no possibility of searching copyrights and confidential information as no respective registers exist.
The Swiss Federal Institute of Intellectual Property (SFIIP) administers a database (www.swissreg.ch) with the following information on the main IPRs:
Swiss and European patents with effect in Switzerland and Liechtenstein after they have been granted. The database contains all Swiss patents filed after January 1978. Earlier patents are only partially available. The database also contains European patents after the number 00 000 001.
Swiss patent applications.
As of 1 July 2008 PCT applications designating Switzerland and Liechtenstein are included only if the national phase for the patent application has been entered or if the corresponding European patent has been granted through the European Patent Office (EPO).
On publication, supplementary protection certificates (SPCs) for national and European (basic) patents with effect in Switzerland and Liechtenstein.
European patents can be searched on the European Patent office's Espacenet database (www.espacenet.ch). PCT patents can be searched at WIPO's Patentscope database (www.wipo.int/patentscope/search/en/search.jsf).
Swiss trade mark registrations.
Trade mark applications are usually available in the database within eight days of receipt.
Swissreg only includes Swiss national marks. International Registrations with effect in Switzerland can be searched for in WIPO's ROMARIN database (www.wipo.int/romarin).
The SFIIP database includes information on Swiss designs after they have been published. It does not include international design rights with effect in Switzerland. These are available on the WIPO Hague Express database (www.wipo.int/ipdl/en/hague/search-struct.jsp). Design searches may provide incomplete results because of the possibility of deferring publication.
Swiss registered company names are available on the Swiss commercial register (www.zefix.ch).
Various private companies provide search databases. Such companies also provide watch services to monitor trade marks for their clients to be informed of third parties' potentially conflicting marks and opposition deadlines.
The owner of an IPR is prevented from enforcing his right if he knew, or ought to have known, of an infringement by a third party, but has not asserted his legal right in a timely manner. The infringer must generally have acted in good faith and have acquired certain vested rights. The time before a forfeiture of the right is assumed depends on the facts of the specific case.
Annual renewal fees are payable for a granted patent from the fifth year after the filing date.
After three years from the date of the grant of a patent, but not sooner than four years from the application date, a person with a legitimate interest is entitled to apply in court for the grant of a compulsory licence if the invention has not been sufficiently implemented before the filing of the claim without any good reason (Article 37, (1) PA). They can also request deletion of a patent registration if the demand of the home market is not sufficiently met by the licences granted two years after the grant of the first compulsory licence (Article 38, (1) PA).
The trade mark must be renewed every ten years by paying the renewal fee.
A registered trade mark that is not used for a continuous period of five years becomes vulnerable to cancellation, unless there are important reasons for the non-use. The use by an authorised third party counts as a use by the trade mark owner.
It is not possible to register copyright and it is crucial to have evidence of when, and by whom, the work has been created.
The work does not need to be used for the copyright to be kept alive.
The right owner must file an application for an extension of the registration every five years and pay the renewal fee. There is no obligation to use the design.
Searches with specialised databases by an IP specialist should be made. Regular searches of the internet, competitors' product catalogues and other specialised publications are advisable. Employees should be trained on basic IPR questions. Collaborative work between the legal, marketing R&D and IT responsible is advisable.
Monitoring services are offered by IP specialists and specialised companies (see Question 2).
The main steps in an IP audit are:
Checking the owner's documentation on registered and unregistered IPRs.
Owner searches with the IP online databases.
Examination of the R&D activities and results.
Examination of the product line and marketing material (to individualise product design, copyrighted work and so on).
Examination whether the IPRs are still enforceable (whether they have been used, the official fees paid, necessary declarations filed and so on).
Examination of IPR contracts.
Checking any pending office actions, conflicts and court proceedings.
Checking whether IPRs are subject to any third-party interest.
Examination of the value of the IPR in terms of strategic importance, money and so on.
See Question 14.
The assignment of any future IPRs is possible only within the boundaries of the protection of personality in the sense of Article 27(2) of the Swiss Civil Code.
The right to the patent application and the patent itself can be assigned either wholly or in part (in cases of joint ownership). The right to be named as the inventor cannot be assigned.
Future inventions can be assigned if they are sufficiently determinable in an assignment. See Question 22 for an employee's assignment of future patentable inventions.
A trade mark application, a registered trade mark or a future trade mark can be assigned wholly or in part, that is for all or certain goods and services protected under the trade mark. The (automatic) assignment of goodwill does not need to be mentioned.
A copyright or a future copyright can be assigned wholly or in part. An assignment of certain exclusive rights resulting from the copyright is possible. The assignment of a right resulting from copyright only includes the assignment of other rights if this is agreed and the transfer of ownership in a work does not include the authorisation to exploit the work's related copyright. Certain moral rights are non-transferable.
The design application, a registered design or a future design can be assigned wholly or in part (in cases of joint ownership and designs that form a part of a larger whole).
The act creating an obligation to transfer an IPR (such as an asset deal, sales agreement or donation) and the act transferring the IPR are different. The requirements for the former depend on the kind of agreement. The form of the latter must be in writing for the assignment of trade marks, designs and patents. A written declaration by the assignor is generally sufficient. The assignment of a European Patent application, however, must be signed by both parties.
A written form is not mandatory but is recommended for copyright and patents that have not yet been filed.
The registration of the assignment of an IPR in the specific IP register has no constitutive effect, with the exception of certification and collective marks. However, the registration of the assignment is advisable since an action may be brought against the registered owner, and since for third parties that are acting in good faith, the transfer only becomes effective once registered (for example, a licensee may pay the royalties to the registered owner).
In the case of an asset transfer subject to the Swiss Merger Act the IPRs are validly transferred at the moment of its registration in the Commercial Register (Article 73(2), Swiss Merger Act).
The main terms in an assignment of an IPR include:
A preamble with background information.
A detailed description of the IPR to be assigned.
An indication as to whether priority rights are assigned.
A description of the scope of the assignment (rights that are licensed, territory and duration).
Representations and warranties in relation to IPR (such as on the title and absence of licences, charges or encumbrances, or present, threatened or known claims, demands, actions or proceedings).
A statement that the IPR is transferred with the signing of the agreement or the assignor's obligation to provide signed application forms to change registrations.
The assignor's obligations during the period between the assignment and its registration.
The assignor's obligation to hand over documents, provide technical assistance and so on.
Requirements for assistance in recording the assignment and an indication who bears the costs of this.
In the case of pending actions, provisions as to the handling of these actions and their outcome.
The right of the assignee to sue for past infringements.
Applicable law (for cross-border assignments) and jurisdiction.
For confidentiality reasons, a simple assignment declaration is normally filed with the registries.
No formalities are required. However, it is strongly recommended that a licence agreement be concluded in writing.
The registration of a licence agreement is not compulsory. However, if a licence is not registered, it cannot be enforced against third parties that have acquired rights to the IPR in good faith. Since there is no register for copyrights, no registration of the copyright licence is possible.
Important terms include:
A preamble giving background information.
A description of the IPR to be licensed.
An obligation to maintain the IPR.
A description of the scope of the licence (the whole right, or only part, and a definition of allowed uses).
A description of whether it is an exclusive, sole or non-exclusive licence.
A definition of the territory.
Provisions on the granting of sub-licences.
Obligations for reciprocal information.
Provisions regarding documentation, know-how transfer, training and so on for licensee and the bearing of the connected costs.
Provisions concerning improvements to a patent and newly developed patentable inventions.
Requirements for mutual support in the event of third parties' infringement and provisions concerning the right to sue and the bearing of costs.
Provisions on the right/obligation to defend the IPR against third-party actions and the bearing of the costs.
Representations and warranties regarding the patent.
Registration of the licence and the bearing of the costs.
Quality control/manner of use.
Downpayments/consideration/royalties and their settlement.
Accounting mechanism and auditing rights of licensor.
Provisions concerning liability, including product liability.
A confidentiality clause.
Termination (ordinary and immediate termination for valid reasons).
Consequences of termination.
Applicable law (for cross border-licence agreements) and jurisdiction.
In the case of exclusive licenses the following terms are generally included:
Minimum turnover/royalties/purchase and consequence if these are not achieved.
Provisions concerning the timing and extent of taking up activities in various territories.
IPRs can be used as securities. Registered IPRs are most commonly used as security as the lender's interest can be recorded against them.
A pledge agreement requires that the pledgee is able to account for the value of the pledged IPRs (if this value exceeds the amount of the secured debt, the pledgee must pay the excess amount to the pledgor). The value of the pledged IPRs must therefore be determined for that purpose, which often proves difficult.
The value of a trade mark is strongly related to the goods and services for which it is used. This is less the case for the value of a patent or the copyright to software. Therefore, when enforcing the security, the compulsory sale of a trade mark (without the underlying goods and services) may not meet the executor's financial expectations.
The pledgee also bears the risk that the pledgor does not pay the renewal fees, which means the respective right expires and the pledgee loses his security. The value of IPRs can also change if not effectively managed.
Security interests over IPRs are often created by a pledge. A written pledge agreement is required. A pledge only has effect against third parties acting in good faith if it is entered in the trade mark, patent or design register.
The security interest in IPRs includes the periodic revenues relating to the IPR, such as licence fees. In addition, the parties can agree on the further extent of the security (such as a licensor's additional revenues).
If the pledgor becomes insolvent and is unable to comply with the payment obligations, the pledgee can recover the debt from the proceeds of sale of the pledge. The sale of the pledge can take place within an execution proceeding, or, if agreed by the parties, a private sale. Pledge agreements entitling the pledgee to take possession of the pledged IPR are not allowed by law and any such terms are void.
Security can also be taken by transfer of ownership of the respective IPR in trust until settlement of the debt (security assignment). In this case, the lender (as registered owner of the IPR) has full responsibility for the secured asset and its maintenance. However, since the creditor holds the title as a fiduciary, it must only dispose of the IPR within the limits defined in the agreement. The formal requirements for such a security assignment are the same as for the assignment of the relevant IPR (see Question 7).
The focus and level of due diligence depends on the:
Type of business (such as start-up or mature company, or technology company).
Relevance of the IPRs for the business.
Representations and indemnities in the purchase agreement.
It should not only focus on identifying the IPRs but also on investigating the scope of IPR protection obtained and obtainable by the company. A due diligence may include:
Identification of the product or service lines and pipeline/business plans regarding IPRs and related coverage searches (for IPRs, licences and so on).
Complete lists of all IPRs with undertakings regarding their completeness, accuracy, and full and sole ownership.
Copies of certificates and documents relating to the IPRs.
Searches on online databases for verification purposes.
Copies of documents or agreements regarding security interests, liens and so on against IPRs.
List of domain names.
List of registered and non-registered company names.
Identification of the computer software used to run the company.
Identification of trade secrets and know-how.
Patentability and registrability searches regarding pipeline.
Freedom to operate searches to see whether the conduct of the business infringes third-party IPRs.
Review of IP-related agreements and IP clauses in agreements (such as licence agreements, research agreements, employment agreements, consultancy agreements, co-existence agreements, settlement agreements and letters of consent).
Change of control provisions (share deals) and restrictions on the transfer of IP (asset deals) in agreements relating to IP.
Identification of income derived from IPRs.
Documentation relating to past, pending and potential IP disputes and court decisions.
Past and future IP strategy and impact on costs.
IP-related warranties can state the following:
All IPRs have been registered (if applicable) in the name of the company.
Completeness and accuracy of the lists of IPRs.
The company is the sole legal and beneficial owner or the (exclusive) licensee with the right to use all IPRs used for the conduct of the company's business.
The registration and maintenance fees are fully paid.
The IPRs are not expired and not abandoned and the necessary declarations to keep them alive have been filed.
There are no liens, encumbrances or other third-party rights.
There are no claims challenging the validity, subsistence or enforceability of IPRs that have been filed or threatened.
The company does not knowingly infringe any third party's IPRs.
There is no known infringement of the company's IPRs by third parties.
Penalties for misrepresentation and undisclosed liabilities.
Non-competition and non-challenge clauses.
Sellers normally avoid warranting that the IPRs are enforceable.
Warranties and/or indemnities are more relevant in a share deal than in an asset deal, because the statutory warranty provisions only relate to the shares and not to the IPRs and/or other assets of the company.
The IPRs are transferred with the transfer of the shares. No further action is required.
The IPRs are transferred by assignment (see Question 7).
It is not uncommon to set up IP joint ventures. The IP-related provisions depend on whether the parties assign or license the IPRs to the joint venture and on the legal form of the joint venture. The main IP-related provisions include the:
Goal of the joint venture and milestones.
Contribution obligations of the business partners and/or shareholders.
Assignment or licensing of the existing IP to the joint venture.
Ownership of the newly developed IPRs and of further improvements and inventions.
In the case of licensing, the definition of exclusivity and of the field of use in which the joint venture is entitled to use existing and newly developed IPRs.
Prosecution, maintenance and enforcement of IPRs and the bearing of costs.
Entitlement to publish the results and suspension of the publication until patent filing.
IP-related consequences of termination or liquidation of the joint venture.
IP-related consequences of termination of the licensing agreement.
Liability in the case of infringement.
Swiss competition law is regulated in the Federal Act on Cartels and Other Restraints on Competition (CartA).
The following are unlawful (Article 5, CartA):
Agreements substantially impairing competition in a market for certain goods or services that cannot be justified by reasons of economic efficiency.
Agreements among actual or potential competitors and between undertakings at different market levels leading to the elimination of effective competition.
The following horizontal agreements among actual or potential competitors are presumed to lead to the elimination of effective competition:
Agreements directly or indirectly fixing prices.
Agreements restricting the quantities of goods or services to be produced, bought or supplied.
Agreements allocating markets geographically or according to trading partners.
Vertical agreements regarding minimum or fixed prices, as well as clauses in distribution agreements regarding the allocation of territories where distributors from other territories are prohibited from sales into these territories, are presumed to eliminate effective competition.
The revised Notice on Vertical Restraints (Notice) published on 28 June 2010 by the Swiss Competition Commission (Competition Commission) contains guidance on distribution agreements, taking into account the results of the European Commission's review and adoption of Regulation 330/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices (Vertical Block Exemption Regulation) (dated 20 April 2010), and associated guidelines as well as case law in Switzerland. It contains the principle that the European provisions are applicable by analogy, subject to the respective Swiss economic and legal conditions. Therefore, agreements that comply with the European provisions should also be lawful under Swiss competition law except where Swiss law is stricter in the specific case.
It is unlawful for market dominant enterprises to impede other enterprises from entering or competing in the market, or to disadvantage other market participants by abusing a market position (Article 7, CartA). These practices include, in particular:
Refusal to do business.
Discrimination against trading partners as to prices or other commercial terms.
Imposition of inappropriate prices or other inappropriate commercial terms.
Targeted undercutting of prices or other commercial terms of specific competitors.
Restriction of production, sale or technical development.
Tying of the conclusion of a contract to the condition that the counterparty accept or render additional performance.
Agreements that are presumed to eliminate effective competition and unlawful practices by dominant enterprises can be directly sanctioned with a fine. The maximum fine can be up to 10% of turnover in Switzerland during the previous three business years.
Swiss competition law does not apply to effects on competition resulting exclusively from laws governing IP (Article 3(2), CartA). However, under the same provision, this exception does not apply to import restrictions based on IPRs. The meaning and scope of this exception remains unclear in the absence of case law.
For planned reform see Question 28.
This area of competition is complex and there is hardly any case law. The commentary below is by way of example and in rough outline only.
IPRs can be used to restrain parallel imports. Switzerland has adopted the regional exhaustion of the patent rights system (that is, patent rights are exhausted if products have been put on the market by the patent owner, or with his consent, in Switzerland or the EEA). This rule is subject to the exception that the patent owner's consent is still required if the product price is fixed by the government in Switzerland and/or in the country where the product has been put into circulation. In addition, a patent that is of subordinate importance to the functional properties of the product cannot be used to hinder parallel imports even if the product has been put on the market by the patent owner, or with his consent, outside the EEA.
Switzerland recognises the principle of international exhaustion in relation to trade marks and copyrights (distribution right).
The legal situation is unclear regarding designs.
IPRs can be used to increase restraints on competition by licence agreements. Restraints on competition arising from the exclusive nature of the IPRs alone are not regarded as problematic. In some cases, however, contractual provisions may infringe Article 5 (illegal understandings) and Article 7 (abuse of dominant position) of the CartA. The IPRs must not be used for purposes other than those intended, such as for the sole purpose to restrict competition. Possible examples are:
The prohibition of passive sales.
Output or sales restrictions.
The refusal of a distribution licence with the purpose of market foreclosure.
Import restrictions based on a patent with the purpose of imposing inappropriate prices or other inappropriate commercial terms.
Claiming monopoly rights based on IPRs, for example based on a blocking-off patent with the sole purpose of foreclosing other companies from making use of technical development.
An absolute no-challenge clause instead of a "terminate on challenge" clause.
By refusing to license, the owner of an IPR can control the downstream level of competition in markets that cannot be entered without access to the IPR. In such cases the refusal to grant a licence can be an abuse of a dominant position.
Swiss competition law does not apply to effects on competition that result exclusively from laws governing IP (see Question 18).
In addition, under Article 5(2) of the CartA, agreements substantially impairing competition in a market for certain goods or services can be individually justified on grounds of economic efficiency if they both:
Are necessary to:
reduce production or distribution costs;
improve products or production methods;
further the research or the dissemination of technical or professional know-how; or
make use of resources more efficiently.
Do not enable the participating enterprises to eliminate effective competition.
In the area of vertical restraints, the provisions of the Competition Commission's Notice (see Question 18) provide some certainty to companies on the legality of specific vertical restraints. It is unclear if the reference within the Notice to European rules covers only the European Commission's new Vertical Block Exemption Regulation or if the Notice to Regulation (EC) 772/2004 on the application of Article 101(3) of the TFEU to categories of technology transfer agreements (Technology Transfer Block Exemption Regulation (TTBE)) applies by analogy. In a recent decision, the Competition Commission has not excluded but left open whether the TTBE can be applied by analogy when assessing the effects of an agreement under Swiss competition law.
Comparative advertising is regulated by Article 3(e) of the UCA. Comparative advertising is permitted but must fulfil the condition of fairness. In particular, it must not be incorrect, misleading, unnecessarily disparaging or imitative.
It is possible to refer to a third party's mark to indicate that the third party's goods are part of one's own product range or, for example, that repair services are offered for the third party's goods.
It is unclear whether the use of a third party's logo mark in comparative advertising is permitted.
Employees and consultants
With the exception of Article 332(2) of the CO (see below) and the general limitations regarding the transfer of IPRs (such as the moral rights inherent to copyright) the employer and employee can freely agree on ownership or exploitation rights of IPRs created by the employee. A written agreement is highly recommended and should typically state that IPRs developed by an employee during the course of his employment and while performing his contractual duties are automatically owned by the employer.
In the absence of agreement between the employer and employee the following legal provisions regarding inventions and designs and software apply.
Inventions and designs created by the employee in performing his employment activity and contractual duties belong to the employer (Article 332(1), CO). The employer does not need to pay compensation. By written agreement, the employer can reserve his right to acquire any future inventions or designs created by the employee while performing his employment activity, but not in the course of performing his contractual duties (Article 332(2), CO). The employer must then decide within six months whether to acquire the invention or design against appropriate compensation. The employee's compensation cannot be waived in the employment agreement.
If a computer program is created by the employee in performing his employment activity and contractual duties, the employer is exclusively entitled to exercise copyright arising from it (Article 17, CA). It is subject to debate whether this entitlement includes the right to develop the software further. Therefore, a written agreement is advisable.
In the absence of an agreement (even implicit) and if none of the above legal provisions apply, copyright is owned by the employee as author (Article 6, CA). However, an employee must assign the copyrights he has created while performing his employment activity to the employer as far as and to the extent they are necessary for the purpose of the employment agreement (Zweckübertragungstheorie).
Special rules apply in the case of universities.
IPRs created by external consultants are owned by them and therefore must be transferred to the ordering party. This transfer can either take place before creation of the IPR by stating so in the respective contract (the defined IPRs then being automatically transferred to the ordering party) or by later assignment. In the absence of an explicit agreement an interpretation of the contract's purposes may be required. A written agreement is recommended.
Income from royalties is subject to income tax at ordinary rates at the level of the licensor. Royalty income received by an individual (as private or business income) or a partnership is subject to income tax at the level of the individual at ordinary rates.
If the licensor is a company, the royalty income received is part of the profits of the company and subject to corporate income tax at federal, cantonal and communal level. Depending on the tax status of the licensor (for example mixed company status, see below) royalty income might benefit from a privileged taxation. A mixed company status is available for companies with only limited commercial activities in Switzerland.
Generally, at least 80% of the income from commercial activities of the mixed company must derive from non-Swiss sources. Most of the cantons additionally require that at least 80% of the expenses be related to activities undertaken abroad.
Switzerland does not generally levy any withholding tax on royalty payments.
However, intra-group royalty payments or royalty payments by a company to its shareholders may (partially) qualify as constructive dividends if the payments are not at arm's length. If so, an add-back on the taxable income is made by the tax authorities and the payment is subject to Swiss withholding tax at a rate of 35%. A full or partial refund of the withholding tax on the dividend is possible if a double tax treaty or the EU saving Directives applies.
The disposal of IPRs by individuals is not taxable if the IPRs are part of the private assets of the individual. If, on the other hand, the IPRs are part of the business assets of an individual or of a partnership, a gain realised on disposal of the IPRs is subject to income tax at the level of the individual at ordinary rates.
A gain realised by a company on the disposal of IPRs is part of the profits of the company and subject to corporate income tax at federal, cantonal and communal level. However, a tax neutral corporate restructuring, where IPRs (and other assets) may be transferred to other Swiss group companies, might be possible if the transfer is made at book value and if certain conditions are met.
The most important multilateral treaties are:
WIPO Convention Establishing the World Intellectual Property Organization 1967.
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).
WIPO Paris Convention for the Protection of Industrial Property 1883 (Paris Convention).
Patent Cooperation Treaty 1970.
WIPO Patent Law Treaty 2000.
European Convention on the Unification of Certain Points of Substantive Law on Patents for Inventions 1963.
European Patent Convention 1973.
Language Agreement (London Agreement), which entered into force on 1 May 2008.
Switzerland-Liechtenstein Patent Cooperation Treaty 1978, which states that every patent granted in Switzerland is also effective in Liechtenstein.
Strasbourg Agreement Concerning the International Patent Classification 1971.
Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure 1977.
Trademark Law Treaty 1994.
WIPO Madrid Agreement for the Repression of False or Deceptive Indications of Source of Goods 1891.
Protocol Relating to the Madrid Agreement 1989.
WIPO Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks 1957.
WIPO Vienna Agreement Establishing an International Classification of the Figurative Elements of Marks 1973.
Singapore Treaty on the Law of Trademarks 2006.
WIPO Berne Convention for the Protection of Literary and Artistic Works 1886 (Berne Convention).
Universal Copyright Convention 1952.
WIPO Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations 1961 (Rome Convention).
WIPO Geneva Convention for the Protection of Producers of Phonograms against Unauthorised Duplication of their Phonograms 1971.
WIPO Brussels Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite 1974.
WIPO Copyright Treaty 1996.
WIPO Performances and Phonograms Treaty 1996 (Performances and Phonograms Treaty).
WIPO Hague Agreement Concerning the International Registration of Industrial Designs 1925.
WIPO Complementary Act of Stockholm of the Hague Agreement Concerning the International Registration of Industrial Designs 1967.
Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs 1999.
WIPO Locarno Agreement Establishing an International Classification for Industrial Designs 1968.
Due to the principle of territoriality applying to IPRs, foreign IPRs are generally not recognised in Switzerland. However, other considerations including the following should be considered.
A foreign trade mark that is well-known in Switzerland (within the meaning of Article 6bis of the Paris Convention (a notorious mark) enjoys protection for all the goods and services for which it enjoys notoriety without being registered (Article 3(2)(b), TA). Notoriety within the relevant public normally pre-supposes intensive use and/or advertising of a mark for many years.
Foreign literary and artistic works enjoy copyright protection in Switzerland based on Articles 3 and 4 of the Berne Convention. Protection criteria relate to nationality and place of publication. Protected authors are entitled to national treatment in countries other than the country of origin of the work and the specific rights granted by the Berne Convention. The enjoyment and exercise of rights is not subject to any formality.
Treaties such as the Rome Convention and the Performances and Phonograms Treaty provide international protection for related rights, such as the rights of performers, phonogram producers and broadcasting organisations.
Under Article 8 of the Paris Convention, a trade name is protected in all member countries without registration, whether or not it forms part of a trade mark. Nationals of any member country enjoy in all the other member countries the advantages that national laws grant to nationals (Article 2, Paris Convention). Under Swiss law, protection is only granted under the provisions on the protection of one's name and the unfair competition law. In order for a third party's use of the foreign trade name in Switzerland to be deemed misleading in the sense of Article 3(1)(d) of the UCA, the foreign trade name must be well-known in Switzerland.
The "Swissness" legislative project
The protection of the "Switzerland" indication of source and the Swiss national cross is to be strengthened. The draft revision of the TMA envisions criteria for more precise regulation of the geographical source of a product or service. It defines the criteria for natural products, processed natural products and industrial goods to be labelled as Swiss. The draft revision of the Federal Act on the Protection of Coats of Arms and Other Public Insignia newly allows the Swiss cross to be used on Swiss products. The Swiss cross is currently only permitted for Swiss services. The Swiss Coat of Arms will remain principally reserved for the state. It is still unclear when the revisions will enter into force.
Revision of the CartA
On 22 February 2012 the Federal Council sent a draft revision of the CartA to parliament (see Question 18). It contains:
An institutional reform of the Competition Commission.
New criteria regarding merger control.
A revision of Article 5 CartA.
It is proposed that agreements presumed to lead to the elimination of effective competition must be forbidden if the companies involved cannot prove the justification of such agreements on grounds of economic efficiency (see Question 18). This could lead to harder restrictions regarding collaborations in which companies agree on protective limitations of the use of IPRs. It is still unclear when the revision will enter into force.
Wenger & Vieli AG
Qualified. Switzerland, 1993
Areas of practice. IP law; contract law; company names and domain names; unfair competition law; advertising law; pharmaceutical, medical device, cosmetic and food supplement law.
- Developing trade mark and design strategies including their clearance, filing, prosecution, monitoring and defence in Switzerland and abroad.
- Drafting and negotiating development, research, co-operation, licence, distribution, purchase, sponsoring, advertising and co-existence agreements.
- IP due diligences in business transactions.
- Legal assessment of advertising campaigns, including effecting the legal review for the advertising and PR material of a multinational pharmaceutical company and advising and representing a multinational cosmetics company regarding advertising and regulatory issues and conflicts.
- Representing clients in conflicts regarding trade marks, domain names, company names, designs, copyrights and unfair competition and co-ordinating such proceedings within Switzerland and abroad.
Wenger & Vieli AG
Qualified. Switzerland, 2010
Areas of practice. IP law; contract law; company names and domain names; unfair competition law; advertising law; IT law.
- Advising clients regarding trade mark filing and prosecution in Switzerland and abroad.
- Representing clients in opposition proceedings.
- Advising clients on legal strategy against copyright infringers of websites.
- Advising clients in conflicts regarding company names and domain names.
- Advising client on duties with regard to open source software.
- Drafting IP agreements and research and development agreements.