I FORMS OF INTELLECTUAL PROPERTY PROTECTION
On the surface, there is nothing innovative, unique or different about Cyprus intellectual property legislation compared with other jurisdictions. Like most EU Member States, Cyprus legislation is a melange of European harmonisation and international treaties. Nonetheless, the fact that the main piece of Cyprus legislation on intellectual property rights is aligned with EU rules and regulations renders Cyprus a favourable jurisdiction in which to seek intellectual property protection, where the law is clear, familiar and not cumbersome.
The main piece of legislation for the protection of copyright is the Copyright Law, L59/1976.3
The Copyright Law provides that copyright consists of: ‘any literal, dramatic, musical or artistic work, sound recordings, films or broadcasts and the typographical arrangement of published editions’.4 The definition is broad enough to encompass computer software5 and databases.6
In order to invoke such protection, any of the above needs to satisfy two main requirements: (1) to be in written7 form; and (2) to be an original piece of its creator.8 Both requirements are interpreted according to the meaning generally ascribed to them.
The duration of protection is defined based on whether or not the author is known, unknown, a physical person or a corporate entity and on the type of work for which the copyright subsists. Copyright protection subsists for 70 years from the end of the calendar year of the author’s death.9
As far as infringement is concerned, there are numerous statutory provisions. However, there are no specialised courts for intellectual property disputes. Such claims are decided by regular judges, whose judgments confirm the importance ascribed to the protection of intellectual property and marketable rights in Cyprus. Nonetheless, the relatively low volume of such cases does not necessarily reflect the commercial value of intellectual property rights within the Cyprus commercial framework. This is illustrated in the case of Costas Socratous v. Gruppo Editoriale Fabbri-Bompiani and others.10 In this case the Supreme Court of Cyprus upheld the universal principles of copyright law; however, the absence of national case law on the matter resulted in the court being referred to English case law in order to determine the application of such principles.
The year in which the decision was issued is also indicative of the absence of national copyright-related case law, which continues to be the case.
In 1998, Cyprus escaped the re-registration of UK patents by the passing of the Patent Law L16(I)/1998. The Patent Law provides that a patentable invention needs to satisfy three requirements: novelty, inventive step and industrial application.11
The duration of protection is 20 years.12 For every year a patent is renewed the relevant fee increases in a proportional manner.
As far as infringement is concerned, the relevant law provides for specific rights for the patent owner.13 Whether or not the rights are infringed depends on the decision of the court.
iii Industrial designs14
Industrial designs are protected by Law 4(I)/2002, the Paris Convention and the TRIPS agreement.
In order for an industrial design to be eligible for protection, the latter has to be new and present individuality in such a way that the informed user will not consider the design as similar to a design that is already known to the public.
Protection may be renewed for a period of 25 years15 upon payment of a relevant fee.
iv Plant varieties
It is widely acknowledged that Cyprus has a strong piece of legislation in place for the protection of plant varieties, Law 21(I)/2004. The requirements for protection are that the variety be new, distinctive, homogenous, stable and have a name.16
The duration of such protection is 20 years from the date of grant in case of a creator and 25 years in case of trees and vines.17 However, the validity of the grant of protection remains at the discretion of the Registrar even after its grant. Thus, the Registrar has the right to revoke protection if the variety does not remain homogenous or stable or when the holder has failed to keep the variety for the entire duration of the right of the creator.
v Geographical indications and appellation of origin
The law governing geographical indications and appellations of origin is the Law on Appellations of Origin and Geographical Indications of Agricultural Products or Foodstuffs,18 and the relevant ministry is the Ministry of Agriculture, Natural Resources and Environment. In turn, the Ministry is responsible for the appointment of a committee of five members whose task is to advise the Ministry on matters related to geographical indications and appellations of origin.
Trademarks are governed by the Trademarks Law, Chapter 268, which has been amended in line with the European Trade Marks Directive (2008/95/EC).
In order for a trademark to be registrable, it has to satisfy both absolute as well as relative grounds that could lead to refusal. Thus, the Trademarks Department needs to be satisfied, inter alia, that the applicant mark may indeed ‘function’ as a trademark, namely, that it is capable of distinguishing goods or services of one undertaking from those of another without being identical or confusingly similar to an earlier mark or goods in such a way whereby the relevant public might consider the marks as coming from the same or economically linked undertakings.
Once the ex officio examination is successfully completed and the mark is published in the official Gazette of the Republic without opposition, a registration certificate is issued, which is valid for an initial period of seven years. After that, the mark is protected for 14 years each time it is renewed.
ii RECENT DEVELOPMENTS
As a result of the modernisation efforts that have taken place on a national as well as on a European level in the past year or so, the procedures for registering intellectual property rights have become more streamlined and efficient.
We are awaiting a major overhaul of the trademarks laws, which are currently under review by the Registrar of Trademarks and Patents, in conjunction with other relevant bodies.
III OBTAINING PROTECTION
In as much as Cyprus IP legislation is based on international treaties and EU law, the method of acquiring protection for IP rights in Cyprus will – to a large extent – appear familiar to EU IP practitioners. In this section, we shall concentrate on the steps involved in the acquisition of trademarks, patent and industrial designs protection in Cyprus.
Generally, the procedure by which a mark is granted protection is divided into four main steps, described below.
If a potential applicant would like to increase the possibility of a smooth registration procedure, it is usually recommended that he or she, via a representative, submits a request for a search either in the Trademark Department’s database, TM View or the via e-search plus, the trademarks database of the European Union Intellectual Property (EUIPO) (formerly known as the Office for Harmonisation in the Internal Market), in order to be reasonably certain that the applicant’s mark would have a prima facie strong potential for registrability.
The second stage is the submission of the actual application, which requires the details of the owner and a graphical representation of the applicant mark. The application is ex officio examined for both absolute as well as relative grounds of refusal, with the Trademarks Department having discretion to impose registrability requirements it may think fit, having regard to the particular merits of each application. The third stage is publication, which marks the beginning of the opposition period. Any third party may, within two months of the date of publication, oppose the registration of the applicant mark on the basis of the relative grounds of refusal. In the absence of such opposition, the application is approved and a registration certificate is issued, which denotes the official grant of protection status to the mark. The date of protection is the filing date of the trademark application.
Similarly, in patents, the relevant application form requires, inter alia, a description and a summary of the invention and a clear and precise description of the claims involved. In order for an application to be regarded as having been submitted, all relevant documents must be accepted by the Registrar. Once submitted, a search report is required. This is an expert’s report that confirms the patentability of the invention while verifying that a person skilled in the art would not consider the invention ‘obvious’. When these requirements are satisfied, the Registrar proceeds to publication of the application along with the search report in a timely manner, within 18 months of the date of submitting the application. Nonetheless, the relevant legislation provides that a person who – by means of a written statement – requests the publication of an application that has complied with the submission requirements but has failed to satisfy publication requirements, still has an undeniable protection of the patent.
As with patents and trademarks, industrial designs also need to satisfy the particularities of the law as these are found in Article 4(1) of the relevant legislation: namely, that they are novel and have an individual character. An application regarding industrial designs must satisfy formal requirements within four months of the initial submission. The date of filing of the application is considered the date on which all relevant documents have been properly submitted to the Registrar.
IV ENFORCEMENT OF RIGHTS
Traditionally, the courts are the proper venue to invoke infringement. Article 60 of the Patent Law 1998 defines the rights accrued by the protection of a patent, while Article 61 determines the civil actions and remedies available to the right holder. If such an infringement is indeed proved in court, the court may rule for an injunction, damages, account of profits and other appropriate remedies. Should a court order be disobeyed, the infringer may be found liable in damages for up to €59,850.20 The burden of proof in such cases is on the plaintiff.
Similarly, with regard to industrial designs, rights conferred upon protection are defined in Article 18 of the 2002 Industrial Designs legislation. The difference is that breach of Article 18(1) confers criminal liability on the infringer, which is punishable with two years of imprisonment or a fine of €85,500,21 or both.
As far as trademark infringement is concerned, the venue for such proceedings is also the courts with the availability of remedies applying mutatis mutandis as in patents and industrial designs.
Enforcement of rights could also encapsulate opposition proceedings during the application stage as well annulment proceedings, post-registration of a mark.
i Opposition proceedings
If an opposition to a trademark application is filed during the application stage, the parties involved will be invited to present their case before the Trademark Registrar. Each party has the right to present their respective submissions either in writing, which will have to be accompanied by a sworn affidavit confirming the truthfulness of the content submitted or to present his or her case orally. The Registrar then issues its decision, which may be appealed before the administrative court.
ii Annulment proceedings
The post-registration opposition procedure is the annulment procedure, also known as expungement. The procedure for expungement is identical to the pre-registration opposition procedure, albeit a different form will have to be submitted.
To date, most expungement cases have either been suspended owing to the excessive length of the procedure or are still pending the final decision of the Registrar. The minimum length of time before a final decision is five years, which makes this process very time-consuming, cost-ineffective and not worth pursuing.
V TRENDS AND OUTLOOK
It should be noted that Cyprus has a definite advantage in relation to extrajudicial opposition and cancellation procedures in comparison to countries that have not yet put in place such procedures. Cyprus will be called upon to bring its current practices in line with the wording of Directive 2015/2436. Although the Cyprus legislator has resisted the adoption of practices followed by other European countries (e.g., not to examine applications on both absolute and relative grounds and to grant trademark protection for a term of 10 years instead of seven on registration and for further 14-year periods upon each renewal), it will be interesting to see the impact of Directive 2015/2436. The new Directive will also put pressure on the authorities to draw up a robust counterfeit policy, since counterfeit goods in transit will also come into play upon its enforcement.
Last and most importantly, and as elaborated upon further below, the Organisation for Economic Co-operation and Development (OECD) results and the Base Erosion and Profit Shifting (BEPS) Action 5 initiative (BEPS 5) resulted in the Cyprus IP Box Regime being extensively scrutinised and amended on 27 October 2016.
i The IP Box Regime
In May 2012, Parliament, recognising the significant potential of intellectual property (IP) marketing, introduced what became known as the Cyprus IP Box Regime (the Regime).22
Its main provisions consisted of an 80 per cent tax exemption on profits from the exploitation of IP rights, an 80 per cent exemption on profits accruing from the disposal of IP rights and a five-year amortisation period.
The most important advantages of the Regime were threefold. First, it applied to net profits. Second, it was not restricted to patents; IP rights have been broadly defined to include trademarks as well as marketing intangibles.23 Third, the holder of such IP right did not have to pay the research and development expenses of the right nor to have been actively involved in the management of the right.24 The acquisition of such rights via an assignment agreement sufficed for the right to fall within the scope of the Regime.
These advantages, in conjunction with the fact that the corporate tax rate in Cyprus was as low as 12.5 per cent, means that any tax-deductible income could be subject to a tax rate of just 2.5 per cent; currently one of the lowest in Europe.25 It used to be the case that the advantages of the Regime were combined with the fact that dividends distributed by Cyprus companies to non-Cyprus residents are exempt from withholding tax26 along with the numerous double taxation treaties established over the years.27
However, after BEPS 5, the Regime came under considerable scrutiny; it was regarded as having the sole purpose of attracting investment, thereby potentially eroding tax. As a result, the Cyprus tax authorities were called to rectify the situation by adapting the provisions of the Regime to ensure that it is compliant with the OECD guidelines.
In light of the above, the Regime has undergone a transitory period whereby new entrants and current entrants with new IP rights entered the Regime. Those who were eligible and managed to enter the Regime will continue to enjoy the advantages of the Regime up to and including 30 June 2021 – this will be the last day of the Regime as it currently stands, provided that the IP rights satisfy certain requirements. The IP rights must have been acquired before 2 January 2016 or they must have been acquired directly or indirectly from related persons during the period 2 January 2016 until 30 June 2016. If IP rights had been acquired by related parties, they may qualify for the advantages of the Regime from 2 January 2016 until 30 June 2016.
According to the new legislation introduced on 27 October 2016, 80 per cent of the qualifying profits derived from a qualifying intangible asset will be considered as a deductible expense. Qualifying intangible assets include patents, computer software and other protected intangible assets protected by law. As a result the new Regime will not apply to commercially generated rights such as trademarks and designs. Further, the new Regime is based on the ‘modified approach based on a causal link’ (modified nexus approach). This means that a direct link must exist between the IP rights that generate the income and the activity that contributed to that income. As per the new legislation, certain transitional provisions have been introduced that enable business with IP assets already within the existing Regime, under certain conditions, to continue benefiting therefrom until 30 June 2021.
As per the new legislation passed, 80 per cent of the qualifying profits derived from a qualifying intangible asset will be considered as a deductible expense. If a loss arises when calculating the qualifying profits, the amount that can be surrendered and carried forward is restricted to 20 per cent. In case of an intangible asset falling under both the provisions of the existing and the new Regime, the existing regime will apply until this is fully phased out. The taxpayer has the right for every tax year not to claim all or part of the deduction offered by the new Regime. The new provisions of the Law are effective as of 1 July 2016. In order for the new provisions of the Law to be applied effectively, the Council of Ministers has issued regulations in relation to the calculation of the taxable income and has provided definitions for terms such as ‘qualifying intangible assets’, ‘qualifying persons’ and ‘qualifying profits’. A formula has been introduced to calculate what is considered to be qualifying profits. The persons who may benefit from the new Regime are Cyprus tax residents, tax-resident permanent establishments of non-tax-resident persons and foreign permanent establishments that have chosen to be subject to tax in Cyprus.
Cyprus remains a very attractive destination for intellectual property rights and other business. The island’s legislative and business structures have created a one-stop destination for any type of business. This is in addition to the advantages Cyprus can offer as a result of its membership of the European Union.
ii Cyprus as a one stop-business destination and the accommodation of IP rights:
The legislative and business structure of Cyprus has always been commercially oriented. It is no secret that the island’s economy is based on two main pillars: tourism and business services (although new areas of economic growth are currently being explored). In terms of business services, the spectrum of providing services has been considerably shaped by the accession of Cyprus to the European Union in 2004. National legislation was harmonised to give effect to the acquis communautaire, such as, for example, the increase of the corporate tax to 12.5 per cent and other new initiatives like the participation on the TM View database and more recently, the platform for online trademark applications and renewals. Further, the European regulations and directives have allowed Cyprus to exploit its geopolitical position in the Mediterranean Sea, thereby becoming a gateway into Europe. In light of the above, Cyprus has all the elements required to safely be characterised as a one-stop business destination. The corporate environment remains fruitful even after the tightening of money laundering controls worldwide. This is mainly because companies incorporated in Cyprus enjoy the benefits of a jurisdiction that is well apprehended for the purposes of business. Therefore, Cyprus companies can be a good vehicle to host IP rights and further the branding reputation and goodwill of a business. As a result, the new IP Box regime is only expected to enhance the geopolitical position of the island by attracting professional tourism such as medical and pharmaceutical researchers, media and technology companies and other research and development experts. This is effected at a time when public and private universities are further expanding their services, especially into medicine, and when national health is in the political forefront – the Ministry of Health is trying to reach a consensus with doctors and nurses in the public sector to put in place what is referred to as the ‘general health plan’, which is said to strengthen the position of private hospitals and medical service providers and researchers in Cyprus.
Cyprus is a very promising and constantly evolving financial centre. The island’s legislative and business structure and geographic position make it an ideal channel through which a successful business strategy can be realised.
1 Christodoulos G Vassiliades is the managing director at Christodoulos G Vassiliades & CO LLC.
2 Moral rights have no relevance in Cyprus.
3 Other relevant legislation includes the Protection of the Commercial Exploitation of Cinematographic Films, the Berne Convention, the Universal Copyright Convention, the Paris Convention, the Rome Convention and most importantly the TRIPS Agreement.
4 Copyright Law L59/1976, Article 3(1).
5 Copyright Law L59/1976, Article 2(1)(h).
6 Copyright Law L59/1976, Article 3(1)(a)(vi).
7 Copyright Law L59/1976, Article 3(2)(b).
8 Copyright Law L59/1976, Article 3(2)(b).
9 Copyright Law, L59/1976, Article 5.
10 (1997) 1 JSC 1204.
11 Patents Law. L16(I)/1998, Article 5(1).
12 Patents Law. L16(I)/1998, Article 26(2).
13 Patents Law. L16(I)/1998, Article 27(1),(2),(4).
14 Utility models have no relevance in Cyprus.
15 Industrial Designs Law, L4(I)/2002, Article 21.
16 Plant Variety Law, L21(I)/2004, Article 5(1).
17 Plant Variety Law, L21(I)/2004, Article 17(1).
18 Law 139(I)/2006.
19 Trade names are protected under different legislative provisions, namely the Partnerships and Business Names Law.
20 Patents Law. L16(I)/1998, Article 61 (2)(a).
21 Industrial Designs Law, L4(I)/2002, Article 25.
22 A lot of countries have chosen to introduce an IP box regime. The numerous IP box regimes currently applicable lead to doubts regarding their effectiveness and to suspicions of competitiveness between the different countries in soliciting market support. However, the Cyprus IP Box Regime is arguably one of the most attractive currently in force; See Lisa Evers, Helen Miller, Christoph Spengel, ‘Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations’ (Discussion Paper No. 13-070, Zentrum für Europäische Wirtschaftsforschung Gmbh, Centre for European Economic Research, November 2013 http://ftp.zew.de/pub/zew-docs/dp/dp13070.pdf).
23 The Organisation for Economic Co-Operation and Development (OECD) (2010a).
24 HM Revenue and Customs, ‘Research and Development – Relief from Corporation Tax’, www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm.
25 See Lisa Evers, Helen Miller, Christoph Spengel, ‘Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations’ (Discussion Paper No. 13-070, Zentrum für Europäische Wirtschaftsforschung Gmbh, Centre for European Economic Research, November 2013.
26 Law on International Trust, No. 69(I)/92 as amended by N.20(I)/2012.